It is ridiculously easy to setup SQLite with Rails. So, I recommend it for n00bs just experimenting with Rails over PostgreSQL. My choice to try it out was based mostly on the fact that I have a locked down workstation at my job, and that PHP ships with it installed by default [1][2] (so it must be decent). It's to be determined whether I would run any class of production application using it for primary storage, but with Migrations it doesn't really matter since the DDL is not DBMS specific.

Update:
I ran into this issue and had to change ownership of both the db file and the containing directory to www-data.