Handling time zones ever since Rails 2.1 should be invisible to the
developer. You might want to check out

http://railscasts.com/episodes/106-time-zones-in-rails-2-1

I tested your case in a recently generated app in Heroku (default
config.time_zone in environment.rb is 'UTC'). I've generated a User
scaffold (the migration had timestamps by default). I created a user.
Even if I use distance_of_time_in_words(@user.created_at), the
displayed time is correct (1 minute ago, 7 minutes ago, and so on).
Even after changing the time zone in environment.rb to 'Fiji', it's
still displayed correctly.
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