Statement modifiers causing confusion

I'm working my way through the second edition of the pickaxe and have
encountered an example that doesn't work as I'd expected.

while line = gets
  puts line.downcase
end

That code made sense... it was then simplified to:
puts line.downcase while line = gets

This doesn't work the same, however. I get:
02.07.rb:1: undefined local variable or method `line' for main:Object
(NameError)

The odd part (to me) is that the error isn't spit out until after I've
entered a line. In which order does the interpreter do it's job? Even
more perplexing is:
line = 'This will never be seen...'
puts line.downcase while line = gets

Defining line solves the issue. So, it seems to me, gets is executed
but something is erroring before the assignment to line... ? Any help
in understanding would be greatly appreciated!

while line = gets

When ruby see the assignement `=' it will think that `line' is a variable.
Then when it parse `gets' and because it's the first time than it seen it,
it will resolved as a method call.

  puts line.downcase

at this step, ruby now that `line' make reference to a variable

end

puts line.downcase while line = gets

When it parse this line : it find `line' and this is the first time that
it seen it and it's not an assignement. For ruby it's a method call

When it parse 'line =', this time line will be referenced as a variable

You can see it with something like this

moulon% cat b.rb
#!/usr/bin/ruby
def line
   "ABC"
end

puts line.downcase while (line = gets).chomp != '123'
puts line
moulon%

moulon% ./b.rb
XYZ
abc
ERT
abc
123
123
moulon%

The first reference is for the method #line, the 2 others for the variable
`line'

02.07.rb:1: undefined local variable or method `line' for main:Object
(NameError)

Here ruby is trying to say :

  1) at compile time, it has not found a variable line when it parsed this
     part of the source and it has resolved `line' as a method call

  2) at runtime, it has not found a method #line

line = 'This will never be seen...'
puts line.downcase while line = gets

Here ruby has seen an affection before the while and it know that `line'
make reference to a variable

Guy Decoux