Yup I'm on Windows 7.

About PowerShell: I tried the classic PowerShell.exe which printed out
the same weird characters so I tried "type .\test.rb" and that gave an
error so I Googled about PowerShell and Unicode and read that the
PowerShell ISE supports Unicode SO I tried that one: "type .\test.rb"
works fine and displays the character well, but "ruby .\test.rb"
(1.9.2p0) prints the weird characters again.

Any more suggestions, please?

Powershell ISE log:

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PS C:\Users\Ye Olde Poopsmith\Desktop> ruby -v
ruby 1.9.2p0 (2010-08-18) [i386-mingw32]

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PS C:\Users\Ye Olde Poopsmith\Desktop> ruby .\test.rb
"\u221A"
#<Encoding:UTF-8>
¶£

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PS C:\Users\Ye Olde Poopsmith\Desktop> type .\test.rb
#system "chcp 65001"
s = "ĘŚ"
p s
p s.encoding
puts s.to_s