Development is the default mode. In development mode, Rails loads and reloads code every time a request is made, making it easy for you to see changes without a cache getting in the way. It’s also typical to use SQLite as the database, as Rails isn’t going to be working at high speed anyway.

Test mode runs like production mode, without reloading code, and has its own database so that tests can run against a consistent database. You could use a fancier database for test mode (and might want to if you suspect strange database interactions), but for getting started, the default of SQLite is fine.