To generate a new project, go to File -> New Project. You'll be presented with a number of project types; choose Ruby on Rails Application. There are a number of options you must select here.
For the database type, configure as shown if you're using MySQL. There are a number of ways to do the database connection, but this is the most direct. Be sure to put in your correct password.
Also, you might want to change the server to Webrick. It's familiar to most Rails coders, even though, for the most part, Mongrel has replaced it.
