DocumentRoot /var/www
<Directory />
Options FollowSymLinks
AllowOverride None
</Directory>
<Directory /var/www/>
Options Indexes FollowSymLinks MultiViews
AllowOverride All
Order allow,deny
allow from all
Change AllowOverride option below the Directory /var/www line from None to All. Then try regerating the htaccess file. This should solve the problem. Dont forget to restart apache after making the change.
<Directory /var/www/>
Options Indexes FollowSymLinks MultiViews
AllowOverride All
Order allow,deny
allow from all
</Directory>
Sorry, copy paste problem. So change AllowOverride in the above section.