I ran into this myself recently.  Rubyzip is a wrapper around the zlib
compression library.

Zlib itself doesn't support password protected zips.  There is another
library made by the same folks that created zlib called Info-zip.  It
does support password protection but you'll have to write your own to
wrapper to make it a Ruby extension.

N.B.  There's a comment in the source for info-zip that implies that
the password protection handling is hard to work with.  I found that to
be the case.  In the end, I purchased a third party compression library
(from ChilKat).