When starting a new rails project the Standard way way to create a Rails application is like this:
rails new new_app
and this will create a folder within the current working directory with the name new_app where all the required files and folders will be located .
But if you are say rewriting a static page into a rails and and want to keep the git history for example. you can delete all the files and create the im in the current directory that you are in with the following command:
rails new .
You can also specify the database type ( this might make it easier if you are for example deploying to Heroku as it doesnt play well with sqlite3 )
rails new . --database=postgresql
or if you want to create it in a folder that you are not currently in you can do the following:
rails new ~/projects/rails/new_app --database=postgresql
or even directly into your web folder
rails new fileuploader /var/www/sites/new_app --database=postgresql
I Hope this is as useful for others as it was for me 