Object#__method__ is actually a Ruby defined method that returns the name of the method that it is called from. The alias at https://github.com/floehopper/mocha/blob/master/lib/mocha/object.rb#L16 overwrites it, causing any code that expects the Ruby defined version to blow up with an ArgumentError (since Object#method takes an argument, and Object#__method__ doesn't). Fix should be as simple as picking an alias that isn't __method__.
Let me know if you need any more details; for an example of breakage, see http://travis-ci.org/#!/Shopify/active_merchant/jobs/1163558.
Thanks for reporting this. I'll have a go at making the change now.
New version 0.11.3 released including fix. Let me know if it doesn't solve the problem.
Works like a champ - thanks!