I initially thought there was only one PayPal library for Ruby, but apparently not. Here's all those I've found:

Paypal by Tobias Luetke - Primarily developed to help integrate PayPal with Rails applications. It works with PayPal's IPNs (Instant Payment Notifications). Source code demonstrations included.

VPayPal - A new library (released February 2006) that supports both Express Checkout API and the direct checkout API.

RoR::PayPal - A library developed by ELC Technologies and made available under the LGPL. It doesn't seem to support the Express Checkout API but presents another option and has a detailed README.

Testing PayPal Web Services with Ruby soap4r - This isn't a library but Pranav Bihari looks at the internals of talking between Ruby and PayPal. This could be useful for developing your own library.