After spending 30 minutes trying to figure out how to do this properly, here is my bare-bones sinatra app that works with rack based servers and allows for easy local development.
config.ru: rackup file for rack based servers (passenger/thin etc.), you shouldn't put anything in here
rackup config.ru
boot.rb: initialization file, handle configuration here. local dev via sinatra builtin webrick
ruby boot.rb
application.rb: your routes/application, go nuts.