Rails root is a silly name. It seems to imply that it refers to the location of the installation of Rails on your system--but that's not what the Rails root is.
The Rails root is the directory of each Rails app. If on your computer you build your app in usr/myapp, then usr/myapp is the Rails root for that particular app.
When you run a Rails new command (
rails new my_app), you create the Rails root. The directory my_app (the Rails root) is built in whatever directory you're in when you run the Rails new command.