To expand on Ryan Doherty's answer a bit...
I work in a statically typed language for my day job (.NET/C#), as well as Ruby as a side thing. Prior to my current day job, I was the lead programmer for a ruby development firm doing work for the New York Times Syndication service. Before that, I worked in PHP as well (though long, long ago).
I say that simply to say this: I've experienced rails (and more generally ruby) performance problems first hand, as well as a few other alternatives. As Ryan says, you aren't going to have it automatically scale for you. It takes work and immense amounts of patience to find your bottlenecks.
A large majority of the performance issues we saw from others and even ourselves were dealing with slow performing queries in our ORM layer. We went from Rails/ActiveRecord to Rails/DataMapper and finally to Merb/DM, each iteration getting more speed simply because of the underlying frameworks.
Caching does amazing wonders for performance. Unfortunately, we couldn't cache our data. Our cache would effectively be invalidated every five minutes at most. Nearly every single bit of our site was dynamic. So if/when you can't do that, perhaps you can learn from our experience.
We had to end up seriously fine tuning our database indexes, making sure our queries weren't doing very stupid things, making sure we weren't executing more queries than was absolutely necessary, etc. When I say "very stupid things", I mean the 1 + N query problem...
#1 query
Dog.find(:all).each do |dog|
#N queries
dog.owner.siblings.each do |sibling|
#N queries per above N query!!
sibling.pets.each do |pet|
#Do something here
end
end
end
DataMapper is an excellent way to handle the above problem (there are no 1 + N problems with it), but an even better way is to use your brain and stop doing queries like that :D When you need raw performance, most of the ORM layers won't easily handle extremely custom queries, so you might as well hand write them.
We also did common sense things. We bought a beefy server for our growing database, and moved it off onto it's own dedicated box. We also had to do TONS of processing and data importing constantly. We moved our processing off onto its own box as well. We also stopped loading our entire freaking stack just for our data import utilities. We tastefully loaded only what we absolutely needed (thus reducing memory overhead!).
If you can't tell already... generally, when it comes to ruby/rails/merb, you have to scale out, throwing hardware at the problem. But in the end, hardware is cheap; though that's no excuse for shoddy code! :D
And even with these difficulties, I personally would never start projects in another framework if I can help it. I'm in love with the language, and continually learn more about it every day. That's something that I don't get from C#, though C# is faster.
I also enjoy the open source tools, the low cost to start working in the language, the low cost to just get something out there and try to see if it's marketable, all the while working in a language that often times can be elegant and beautiful...
In the end, it's all about what you want to live, breathe, eat, and sleep in day in and day out when it comes to choosing your framework. If you like Microsoft's way of thinking, go .NET. If you want open source but still want structure, try Java. If you want to have a dynamic language and still have a bit more structure than ruby, try python. And if you want elegance, try Ruby (I kid, I kid... there are many other elegant languages that fit the bill. Not trying to start a flame war :D)
Hell, try them all! I tend to agree with the answers above that worrying about optimizations early isn't the reason you should or shouldn't pick a framework, but I disagree that this is their only answer.
So in short, yes there are difficulties you have to overcome, but the elegance of the language, imho, far outweighs those shortcomings.
Sorry for the novel, but I've been there and back with performance issues. It can be overcome. So don't let that scare you off.