How can pagination be done in ruby on rails 3.1?

The more recent kaminari gem can be used in Rails 3. You can refer https://github.com/amatsuda/kaminari
it is very simple to use.
Put this line in your Gemfile:

gem 'kaminari'

Then do bundle install
Typically, your controller code will look like this:

@users = User.order(:name).page params[:page]

On the views Just call the paginate helper:

<%= paginate @users %>

Now you can see the paginated result..