Rails 3.0.0, Passenger 2.2.15:
gem \'paperclip\', :git => \'git://github.com/lmumar/paperclip.git\', :branch =
I installed the passenger gem and its apache module as a sudo user and that was the problem in my case.
The reason why I used sudo initially was that I copied the code from railscasts' episode 122. Installing it without sodu access resolved this issue. Since Ruby was installed using rvm without the sudo access on my system.