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Yes, thats surprising behavior. Fortunately its fixed in 1.9. :)

Spoiler alert:

.

1.8.x produces 3 while 1.9 produces :foo

Why was this broken in the first place? (What abomination of semantics would cause this behaviour)?

Closure variables not having their own scope and shadowing method level vars. They're simply implemented as method level vars, so not true closures.

I got that, but I don't understand why it should gain the value 3 before a single execution of the loop.

It's only at the end that the value of x is 3. The puts x immediately after x = :foo does print :foo

Hmm, interesting. I suspect this will break many things, but I'm happy that they have changed it.

The problem is not as pervasive as you might think, though it does happen.