When you connect to a database you define the database location via the connection string. When a computer wants to connect to SQL Server it needs to define the SQL Server address using the Server attribute, remote or local. The server location can be expressed with computer name if DNS can be used, IP address etc. Also if the SQL Server instance is a named instance, then the instance name needs to be specified in Server attribute.
For examples have a look at
http://www.connectionstrings.com/sql-server/[
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