You can check with “gem list” which gems are installed. Probably you
have a newer version installed (0.9.2) as required in your Gemfile
(0.8.7).
So try running “bundle exec rake” instead of just rake.
See here for example:
I encourage you to use the ruby version manager. It enables you to
switch between different gem sets really easy and you can install
different gem versions for different projects.
I am not sure if rails 3 works with ruby 1.8.7 but I would recommend
you to switch to version 1.9.2 anyway
Rails 3 and even 3.1.0rc4 work fine with ruby 1.8.7.
Make sure the place you will eventually deploy to supports Ruby 1.9.2
before switching. I just had to downgrade to deploy to Dreamhost because
their passenger won’t work with anything but 1.8.7.