Rails3
Developing for Rails3.
Create a new application
Test your installation by making a test application
rails new tetsApp cd testApp rails server
Now check the http://localhost:3000 in your browser.
Using Postgres
Make sure you have pg gem installed (not the old "postgres" gem)
gem install pg
Making a new application
rails -d postgresql my_rails_app
Your database.yml file
development: adapter: postgresql host: localhost port: 5432 username: your_db_username password: your_db_password database: your_rails_project_development schema_search_path: public encoding: utf8 template: template0
More info
Try this: http://wiki.rubyonrails.org/database-support/postgres