Sheik is Zelda who used magic to make herself appear as a male. Whether or not she actually gave herself a sex change is uncertain at best. See Sheik's entry at Zeldapedia for further information.
Sheik is probably female, seeing as Sheik is Zelda's alter ego. However, Sheik is not just a disguise- Since Sheik has red eyes, like most sheikah, it stands to reason that Zelda used magic to actually change into a sheikah, not just to change her appearence. so i think it's possible that Sheik is male. Of course, Sheik never states his/her gender, so Sheik may not even be pretending to be male, and actually be female, in which case Ruto probably was simply mistaken.