It's preferable that you'll use RVM for managing gems and ruby versions.
Go to project directory and install appropriate version of ruby and create gemset for the project as described in .ruby-version and .ruby-gemset files.
Install gems by running
bundle install
Copy database.example.yml as database.yml and configure your database connection.
Create database and run migrations:
rake db:create
rake db:migrate
Seed database with test data:
rake db:seed
Start your server:
rails server