This is a new version file /usr/bin/rails generated on my system by installing the Rails 3 Gem. The problem with this executable is that the ‘rails’ command no longer provided a way to execute the executables from Rails 2, because the bin had moved from Rails to Railties. A few more details in the related blog post.
Call a version of Rails 2 like so (after putting the following code in /usr/bin/rails):
rails _2.3.5_ myapp
The second file can be put in /usr/bin/rails2 as a convenience path to run the latest available Rails 2 version easily.