Like most 'free' games which involve leveling up there is an in game currency which can be purchased with real money, and earned (slowly) within the game.
Progress can be slow without gems and the game tries to encourage you to buy gems, as it is a free game and the only way the developers will make money from the game, personally I think supercell should be more generous with gem distribution.
Progress can be slow without gems, especially by the time that upgrades take days to complete, you have already invested alot of time in the game when you realise you need to spend money or progress slowly. You start the game with 500 gems and you should try to save as many as possible for later in the game.
Builders Huts are the only useful item that can only be purchased with Gems and buying an additional builders hut is the smartest was to spend gems if you want to progress quickly. (The only time I have paid for gems is to buy an additional builders hut).
spend your gems sparingly especially if your in the early stages of the game as you will need them more later, if you can wait for something to finish upgrading or try to raid instead of buying more gold/elixir. If you don't want to buy gems then patience is key, the game requires so much time an upgrading that you just want to upgrade constantly and as quickly as possible but it is much better wait and enjoy the game or before you know it you can spend a lot of money on the game.
To cut just one day off building time will cost you 260 gems, and buying resources is generally not worth it in most cases. Check out the gold and elixir section and read about farming as a quick resource solution.
GardeningClean up your village and get rid of trees and bushes can earn you gems. You get between 0 - 3 gems each time.
AchievementsThe main ways to gain gems are from completing achievements which you can see by clicking on the icon of this lady:
The most lucrative achievement which everyone should aim for is this one:
it is worth 450 gems and gaining trophies isn't too hard when you get good attack and defence systems going. The method I used for this was a good defence, plant bombs where the attack is coming from and make sure your clan castle is always full, as matchmaking is based on your trophy count if your at a lower level than most people with your trophy count it wont take long for you to be attacked, let them attack you while you have as many bombs and traps planted as possible and a full clan castle, then as soon as you have been attacked request troops and re plant bombs and traps, this worked for me and I got the achievement at quite a low level.Look through the achievements and see which ones are achievable for you.
There is also the 'Unbreakable' Achievement which the third star is worth 100 gems and the second star 50. I will soon add a guide for this achievement.
It's also worth noting that there is no hack available for free gems, and probably won't ever be. we've all searched for them but I doubt one will ever exist, especially as the game is one of the top grossing apps in the app store.
The jailbreak tweak; iApCracker which sometimes unlocks in game addons dosen't work for this game either or most others where you buy a currency such as gems or donuts (simpsons tapped out) instead of directly unlocking something.