I have Ruby installed, but I still need to add it to the PATH variable. I found something online for how to manually add it using the command line:
set PATH=
Yes, this is correct. In your example %PATH% will be expanded to the current value of the PATH variable, so this command is effectively adding a new entry to the beginning of the PATH.
Note that calling set PATH will only affect the current shell. If you want to make this change permanent for all shells, the simplest option is to set it as a user variable using the Environment Variables dialog box.
On Windows 8 you can open this dialog by hitting Win+s and searching for 'environment variables'. On earlier versions of Windows you can right-click 'My Computer', choose Properties, then Advanced system settings, then Environment variables. You can create (or update) a PATH variable in the user variables section and add whatever entries you need. These will be appended to the existing system path. If you take this approach you will need to open a new cmd shell after updating the variables.