PostgreSQL 9.0 or later:
Modern Postgres (since 2010) has the string_agg(expression, delimiter) function which will do exactly what the asker was looking for:
SELECT company_id, string_agg(employee, ', ')
FROM mytable
GROUP BY company_id;
Postgres 9 also added the ability to specify an ORDER BY clause in any aggregate expression; otherwise you have to order all your results or deal with an undefined order. So you can now write:
SELECT company_id, string_agg(employee, ', ' ORDER BY employee)
FROM mytable
GROUP BY company_id;
PostgreSQL 8.4.x:
Please note that support for Postgres 8.4 ended in 2014, so you should probably upgrade for more important reasons than string aggregation.
PostgreSQL 8.4 (in 2009) introduced the aggregate function array_agg(expression) which collects the values in an array. Then array_to_string() can be used to give the desired result:
SELECT company_id, array_to_string(array_agg(employee), ', ')
FROM mytable
GROUP BY company_id;
PostgreSQL 8.3.x and older:
When this question was originally posed, there was no built-in aggregate function to concatenate strings. The simplest custom implementation (suggested by Vajda Gabo in this mailing list post, among many others) is to use the built-in textcat function:
answered 2008-09-04T15:03:25.147