I'm the author of node-postgres. First, I apologize the documentation has failed to make the right option clear: that's my fault. I'll try to improve it. I wrote a Gist just now to explain this because the conversation grew too long for Twitter.

Using pg.connect is the way to go in a web environment.

PostgreSQL server can only handle 1 query at a time per connection. That means if you have 1 global new pg.Client() connected to your backend your entire app is bottleknecked based on how fast postgres can respond to queries. It literally will line everything up, queuing each query. Yeah, it's async and so that's alright...but wouldn't you rather multiply your throughput by 10x? Use pg.connect set the pg.defaults.poolSize to something sane (we do 25-100, not sure the right number yet).

new pg.Client is for when you know what you're doing. When you need a single long lived client for some reason or need to very carefully control the life-cycle. A good example of this is when using LISTEN/NOTIFY. The listening client needs to be around and connected and not shared so it can properly handle NOTIFY messages. Other example would be when opening up a 1-off client to kill some hung stuff or in command line scripts.

One very helpful thing is to centralize all access to your database in your app to one file. Don't litter pg.connect calls or new clients throughout. Have a file like db.js that looks something like this:

module.exports = {
   query: function(text, values, cb) {
      pg.connect(function(err, client, done) {
        client.query(text, values, function(err, result) {
          done();
          cb(err, result);
        })
      });
   }
}

This way you can change out your implementation from pg.connect to a custom pool of clients or whatever and only have to change things in one place.

Have a look at the node-pg-query module that does just this.

Here is an example I used to connect node.js to my Postgres database.

The interface in node.js that I used can be found here https://github.com/brianc/node-postgres

var pg = require('pg');
var conString = "postgres://YourUserName:YourPassword@localhost:5432/YourDatabase";

var client = new pg.Client(conString);
client.connect();

//queries are queued and executed one after another once the connection becomes available
var x = 1000;

while (x > 0) {
    client.query("INSERT INTO junk(name, a_number) values('Ted',12)");
    client.query("INSERT INTO junk(name, a_number) values($1, $2)", ['John', x]);
    x = x - 1;
}

var query = client.query("SELECT * FROM junk");
//fired after last row is emitted

query.on('row', function(row) {
    console.log(row);
});

query.on('end', function() {
    client.end();
});



//queries can be executed either via text/parameter values passed as individual arguments
//or by passing an options object containing text, (optional) parameter values, and (optional) query name
client.query({
    name: 'insert beatle',
    text: "INSERT INTO beatles(name, height, birthday) values($1, $2, $3)",
    values: ['George', 70, new Date(1946, 02, 14)]
});

//subsequent queries with the same name will be executed without re-parsing the query plan by postgres
client.query({
    name: 'insert beatle',
    values: ['Paul', 63, new Date(1945, 04, 03)]
});
var query = client.query("SELECT * FROM beatles WHERE name = $1", ['john']);

//can stream row results back 1 at a time
query.on('row', function(row) {
    console.log(row);
    console.log("Beatle name: %s", row.name); //Beatle name: John
    console.log("Beatle birth year: %d", row.birthday.getYear()); //dates are returned as javascript dates
    console.log("Beatle height: %d' %d\"", Math.floor(row.height / 12), row.height % 12); //integers are returned as javascript ints
});

//fired after last row is emitted
query.on('end', function() {
    client.end();
});

UPDATE:- THE query.on function is now deprecated and hence the above code will not work as intended. As a solution for this look at:- query.on is not a function