There are two different kinds of spells: Combat spells that are cast during battle and rituals that are cast during strategic planning.
Link to Wolfbane's interactive Spell Database
There are a great number of different combat spells from different schools and paths of magic, and not all of them do direct damage to units. There are spells that summon additional creatures to the battle, spells that provide aid to allies or the caster (known as buffs) and spells that weaken the enemy.
Combat spells cause fatigue, and the strongest spells require magic gems. If a mage reaches 100 fatigue points he will faint. If fatigue goes over 200 the mage will start taking damage and eventually die.
Having more skill in a path of magic makes spells from that path significantly less burdensome to cast and in some cases it can also make the spell vastly more powerful and harder to resist. Good examples of spells that scale well with power are Blade Wind, Orb Lightning and Nether Darts.
Magic gems can be used to reduce the amount of fatigue caused by a spell, since using a gem will count as +1 level to that path for all purposes. A mage cannot gain new paths by carrying gems of a different school, and only one gem will count.
Ritual spells are cast during the strategic planning phase. Each ritual requires magic gems and a laboratory in the same province as the mage casting the ritual. Rituals range from summoning creatures to causing damage to enemy troops or provinces. All ritual spells take one turn to cast, be it a lowly ritual of Summon Cave Drake or the powerful global enchament of Astral Corruption. Keep this in mind when planning spells for your pretender or most powerful mages, as they may be wasting their time with spells easily cast by weaker cohorts. A ritual may be set to repeat by using the hotkey capital-M and selecting the monthly ritual.
Carrying gems has no effect on rituals since the gems used are drawn directly from the gem pool. Occasionally the skill of a mage in a certain path has an effect of the ritual. A highly skilled Death mage can summon many more Ghosts with the aproriate spell than a mage who barely meets the requirements. Scalable spells are denoted by a "+" after the gem requirement.
Utilizing rituals efficiently is one of the most important parts of strategy in the game.