According to this post by Yehuda Katz:
We checked out the git repositories into BUNDLE_PATH (again, defaulting to ~/.bundle/#{RUBY_ENGINE}/#{RUBY_VERSION} or $GEM_HOME with rvm) using the --bare option. This allows us to share git repositories like the rails repository, and then make local checkouts of specific revisions, branches or tags as specified by individual Gemfiles.
This answer states that:
Bundler installs your gems into its own ~/.rvm/gems/ruby-{version}/bundler/gems directory.
So that when you do a bundle update
, bundler can simply do a git pull
.