Rubinius is an open source project started by Evan Phoenix to build a new VM for Ruby. Engine Yard hired him (and a team) and was paying them for working on this project only. I guess they wanted the Ruby ecosystem to grow faster and build a goodwill for themselves in the community. (Or maybe the main decision maker (Ezra?) is a true blue hacker only who loves good software!)

These layoffs are not as bad a news for a customer. It's just that as a hacker or an open source adopter, it is a bit of a blow. It is like someone taking back half the lottery money you initially won. (Hell, it was still a lottery only.)

There are very few companies (especially startups) who go so far as Engine Yard does/did in actually hiring people and supporting an Open Source Project to this extent. And they still haven't completely pulled the plug off it yet. I sincerely hope Rubinius does become a stable implementation of Ruby, and all the hard work pays off well for the contributors.

Disclaimer: I don't work at Engine Yard, and am thousands of miles away from the place of action.