Is God present when two or three people pray? Certainly. He is also present when one person prays. God is even present working out His will when no one is praying. To say that God is limited by us is to diminish Him and play to our natural perversity to put ourselves on a par with the Almighty. 

In my own perversity I think that, many times, Matthew 18:19 is quoted to make us feel better when so few people show up at the few prayer meetings that still exist in the western world.But that isn't what Matthew 18:19 is all about.

Paying attention to the context of Scripture is one of the most basic of the principles of interpretation. In the case of Matthew 18:19, it is a principle that is almost always violated.

Look at the context of Matthew 18.

The subject of the passage is resolving conflict. In the broader context, the Lord has been talking to His listeners about the Kingdom, and about forgiveness. He makes a little aside in verses 15 to 20 to teach about the procedure to be followed in solving the problem of a brother who has committed sin and needs to be confronted with that sin. 

The offended party has the responsibility to go and try to work things out. This is the first step and is to be done one-on-one. The problem is not to be ignored or to be allowed to fester and grow until the breach becomes irreparable. It is not the offender's responsibility to go to the offended—though that would be nice. Some offenders know what they had done, others don't, so it takes the offended to give the offender the benefit of the doubt and bring the problem to the attention of the one who caused it.

If resolution is reached at this level, no one else needs to know anything about the problem, or who did what to whom. Those things which have the potential to cause division between brothers in Christ are not allowed to do any prolonged damage.

If nothing is accomplished at the first level then, and only then, do others get involved. Matthew 18:16 is connected to our key verse in 18:19. If the offender won't listen, then the offended brother should take the problem to two or three other believers of confidence, share the struggle and ask for prayer, advice, and moral support. It is possible that the offended person has misinterpreted things, seen offense where there wasn't one, mishandled the situation and the counsel of other key people can help to bring perspective to the problem. Then, as the "witnesses" pray together to seek the Lord's mind, come to agreement about the situation and how to handle it, they can go to the offender with the confidence that God will direct them as they have asked. That's the promise mentioned in verse 19.

If this second level in the procedure fails to bring resolution then, and only then, does the matter go before the church for disciplinary action if the offender refuses to listen to the broader Christian community. 

The prayer of two or three mentioned in this passage is in the context of conflict resolution, not in the context of general prayer. Even though the application so often given to us from this verses is correct—God is in the midst of those two or three who come to pray about anything—we need to be extremely careful not to pull any verse out of its context and make it mean what we want it to mean. That's how heresies begin and how cults are formed.

More importantly, though we quote this verse endlessly we are very poor at applying it within its context. Conflicts and divisions among brothers and sisters in Christ are destroying the church from the inside out because we don't handle them biblically. We don't follow the procedure given to us here in Matthew 18 and so become at least passive participants in destroying the testimony of the church before a watching world.

The Lord finished off this teaching with the parable of the unmerciful servant (18:21-35). The story grew out of Peter's question, no doubt prompted by what the Lord has just said about conflict resolution.

What is the responsibility of the offended in the equation? Mercy and forgiveness is to be practiced forever between believers. The parable illustrates clearly that only God can say when no more forgiveness will be offered.