Jewels are little bits of colored corundum (the same stuff as sapphire; Al2O3) with a bit of dye. Originally real rubies and quite expensive, they are now a few cents each. Used as pivots and bearings, they are quite wear-resistant and with a bit of oil or grease will last for many years.
See the Orient post below for a decent explanation of the various types (cap, hole, pallet, and roller).
As a rule of thumb:
- 17 jewels is the current minimum for an automatic movement, with 21 being more common.
- Orient has a decent page on jewels and jeweling
- The all-time classic '83 jewels too far' post on TZ is most excellent and a must-read.