I found that “Ruby 1.8″, packaged with Ubuntu 10.04, does not seem to run SASS out of the box. This is my recipe, cobbled together from various websites, to get things going. I’m using Ruby Version Manager “rvm” to use an updated version of Ruby.

    sudo apt-get install curl git-core ruby
    bash -s stable < <(curl -s https://raw.github.com/wayneeseguin/rvm/master/binscripts/rvm-installer )
   

In ~/.bashrc change you need to replace the line that says:

   [ -z "$PS1" ] && return
   

with

   if [[ -n "$PS1" ]]; then
   

Then add this to the bottom:

    if [[ -s $HOME/.rvm/scripts/rvm ]] ; then source $HOME/.rvm/scripts/rvm ; fi
    fi   
   

Save. Then re-read the .bashrc file.

    source ~/.bashrc  
   

Then from the command line:

   rvm notes
   sudo apt-get install build-essential bison openssl libreadline5 libreadline-dev curl git-core zlib1g zlib1g-   dev libssl-dev vim libsqlite3-0 libsqlite3-dev sqlite3 libreadline-dev libxml2-dev git-core subversion autoconf
   rvm list known
   rvm install 1.9.2-head
    
   #Verify ruby is installed
   ruby -v
   

Now that we have ruby installed lets fetch compass.

    rvm 1.9.2-head
    gem install compass

Phew! Okay now we should be able to watch the SASS directory for changes.
Navigate to wherever your SASS lives and

    compass watch ./sass

Now compass and SASS should be working :-)