I just started playing around with PostgreSQL. My goal is to create a new user outside of postgres with all of the same privileges and create a database for my ror app. I\'m abl
You are confusing system user with database user. The error message comes from sudo and has nothing to do with PostgreSQL at all.
To log in as database user Jason:
psql -U Jason
You need to supply a password, of course, as long as password-less access is not set up. Peer authentication only works for a system user of the same name ("Jason").
More in the excellent manual about psql here and about authentication methods here.