The message you’re getting is a clear indication that you lack something for the correct installation of that gem:
Could not create Makefile due to some reason, probably lack of
necessary libraries and/or headers. Check the mkmf.log file for more
details. You may need configuration options.
There is no Windows native version of latest release of pg (0.10.0) released yesterday, but if you install 0.9.0 it should install binaries without issues.
Anyhow, if you want to install the gem, you need a build environment installed. If you’re using RubyInstaller, then you need the DevKit
Installation of the gem will only require you provide additional options to gem installation (like --with-pg-dir)
subst X: "C:\Program Files (x86)\PostgreSQL\8.3"
gem install pg -- --with-pg-dir=X:
subst X: /D