psql: could not connect to server: Network is unreachable

Is the server running on host "localhost" and accepting
TCP/IP connections on port 5432?

Now, I'm really confused because I used to have postgre 7 installed on
my Debian without any serious problems with the configuration. Right
now, I'm using Ubuntu Breezy and postgre 8.

I have used the sample .conf files to set my own
at /var/lib/postgres/data

the only two un-commented lines at the postgresql.conf are :

listen_addresses = 'localhost' # what IP interface(s) to listen on;
# defaults to localhost, '*' = any
port = 5432

And my pg_hba.conf is :

# TYPE DATABASE USER CIDR-ADDRESS METHOD
local all all trust
# The same using local loopback TCP/IP connections.
#
# TYPE DATABASE USER CIDR-ADDRESS METHOD
host all all 127.0.0.1/32 trust
host all all ::1/128 trust

The command I issue to get this reply is :
psql -h localhost -U markulis

Also, I don't know if it is of any importance, but if I issue the
command while online, it simply hangs. I have also experienced the same
problem while trying to connect from pgadmin3.

I really need some help on this, because I have to present my diploma
work in short time and the system doesn't work.