The error means that the connections details you are are incorrect.
Make sure that the SQL Server is installed in mixed mode and allows TCP/IP connections.
If you are using SQL Server Express TCP/IP connections are turned off by default even if you install in mixed mode and need to be enabled.
SQL Server Express is often installed with a name pipe so you would use something like localhost\SQLEXPRESS as the host name.
SQL Server is a very complex beast and for further help it maybe worth buying a book on it, or asking questions on a wesite dedcated to SQL Server.