How does ruby's String .hash method work?

The hash method is defined for all objects. See documentation:

Generates a Fixnum hash value for this object. This function must have the property that a.eql?(b) implies a.hash == b.hash. The hash value is used by class Hash. Any hash value that exceeds the capacity of a Fixnum will be truncated before being used.

So the String.hash method is defined in C-Code. Basically (over-simplified) it just sums up the characters in that string.