First the the url of the gettext manual changed:
Secondly, lets explain a little bit what this fonction does.
By default, gettext will use the LC_CTYPE of the language you choose (for example fr_FR).
This LC_CTYPE is extracted from your locales.alias file in your configuration dir (Should be /etc/locales.alias).
By default, the encoding is frequently iso-8859-1.
So if you want to make your site utf-8 aware, you need to bind your domain with the right encoding.
Here is a sample:
$domain = 'your_text_domain';
As quoted in other notes, the translations path should be like
Your translation goes in the LC_MESSAGES dirs ... Hopes this helps :)