When connecting to SQL Server 2005, this failure may be caused by the fact that under the default settings SQL Server does not allow remote connections.

Check my article in my blog,
http://venkattechnicalblog.blogspot.com/2008/06/sql-server-2005-connection-error.html
 
Cheers,
Venkatesan Prabu .J

hi
for allow remote connections. ..pl do following process ..

Start - > Programs - > Microsoft SQL-2005 -> Configuration Tools -> SQL Server Surface Area Configuraiton -> Surface Area Configuaration for Services and Connections...

Set Local and Remote Connections  and also set Using both TCP/IP and named pipes.

Then restart your pc.

thanks
Don't forget to Mark Do you like this Answer
 that solved your problem!

Hy,
   What kind of authentication are you using. If you are using SQL Server authentication rather than Windows authentication, then SQL Server must be configured to support SQL Server and Windows Authentication modes. If you have SQL Server management studio, you should right click on the server instance, open Properties and under Security verify the server authentication.
Hope this helps.
   

  


 
Connection string should be like this.
Hope this code will help u.