The .sqlite3 file is the actual DataBase in a SQLite installation.
The schema.rb file is a point-in-time representation of the database structure. This means that every time you alter the structure of a database (add a table, remove a table, add a field to a table, add or remove an index etc.) this file will be changed by rake to reflect the current structure of the database. Note that no data is in that file.
If you erase the database (and the schema.rb file for that matter) a
rake db:setup
would actually execute the following three rake commands:
rake db:create
rake db:migrate
rake db:seed
So if you have your migrations intact and your seed file intact, erasing the schema.rb and the *.sqlite3 files will erase that database (and all its data) and the reflect of the current database schema, but not the migration files or the seed data. You will be able to regenerate the database (with only the seed data, no other data) with a
rake db:setup
Take note that the development.sqlite3 is one of the 3 different databases that might exist, others being production and test.
But, if you are willing to reset the base, a better approach would be a
rake db:reset
Please read Migrations Guide if you need more information about it.