sudo apt-get install postgresql

sudo -u postgres psql postgres
password postgres

sudo -u postgres createdb mydb

psql -U postgres -h localhost
Password for user postgres:
psql (9.1.4)
SSL connection (cipher: DHE-RSA-AES256-SHA, bits: 256)
postgres=#

development:
 adapter: postgresql
 encoding: unicode
 database: mydb_development
 pool: 5
 username: postgres
 password: postgres

test:
 adapter: postgresql
 encoding: unicode
 database: mydb_test
 pool: 5
 username: postgres
 password: postgres

production:
 adapter: postgresql
 encoding: unicode
 database: mydb_production
 pool: 5
 username: postgres
 password: postgres

rake aborted!
FATAL:  Peer authentication failed for user "postgres"

rake aborted!
couldn't parse YAML at line 28 column 0

development:
 adapter: postgresql
 encoding: unicode
 database: hackathonio_development
 pool: 5
 username: postgres
 password: testing
 host: localhost {This is line 28}

$ createuser <username>

$ rake db:create

$ rake db:migrate