In many places You can find info that Rails in development mode checks whether files with application were modified and in such case reloads them. That way You can test always latest version of application.
This is not correct, when You think Rails reloads whole application. Reloaded can be content from app directory. I did not verified that in Rails code, it is from my observations. In particular there is no such checks for files in lib directory. So when You made some changes in those files (like in my Act As Authentication modification, You have to restart whole application, even in development mode.