Make sure you have libpq-dev package installed. If you don't, install it and try installing pg again without the --with-pg-config parameter.
In regards to the --with-pg-config parameter:
When passing parameters to the gem you're installing you must use two dashes before the two dashes from the option, like so:
gem install gem-name -- --gem-option
So what you want to run in order to achieve installing pg with the --with-pg-config option is:
gem install pg -v '0.12.2' -- --with-pg-config=/usr/pgsql-9.2/bin/pg_config
EDIT
Also, one last tip, after searching a bit more about this issue I found that your ruby version and architecture might affect pg's installation, I'm quoting this link:
I was hesitant to uninstall everything so I just uninstalled Ruby and reinstalled with the option set to 64-bit only (platform: "x86_64-darwin12.2.0"). After reinstalling Ruby with this option, the PG gem installed without hitch and I am back to being happy.