Can't install Homebrew on Mac OS X Lion

Question

I followed the simple instructions on Homebrew's homepage:

Paste this at a terminal prompt:
/usr/bin/ruby -e "$(curl -fsSL https://raw.github.com/gist/323731)"

But I get the following permission errors. What is the proper way to install Homebrew on Mac OS X Lion?

$ /usr/bin/ruby -e "$(curl -fsSL https://raw.github.com/gist/323731)"
==> This script will install:
/usr/local/bin/brew
/usr/local/Library/Formula/...
/usr/local/Library/Homebrew/...

Press enter to continue
==> /usr/bin/sudo /bin/chmod o+w /usr/local
mkdir: /usr/local/Cellar: Permission denied
mkdir: /usr/local/etc: Permission denied
mkdir: /usr/local/include: Permission denied
mkdir: /usr/local/lib: Permission denied
mkdir: /usr/local/Library: Permission denied
mkdir: /usr/local/sbin: Permission denied
mkdir: /usr/local/share: Permission denied
mkdir: /usr/local/var: Permission denied
mkdir: /usr/local/.git: Permission denied
Failed during: /bin/mkdir /usr/local/Cellar /usr/local/etc /usr/local/include /usr/local/lib /usr/local/Library /usr/local/sbin /usr/local/share /usr/local/var /usr/local/.git
$