This depends on the application architecture.
If your application is a "client/server" database desktop application, then generally you would have a single database instance that all desktop applications connect to. In this case you need an attached and running instance of your database on a server running SQL Server.
If the application is designed around a "local" database, then each desktop running the application needs to have some flavor of SQL Server running. This could be SQL Server Express to which a database file is dynamically attached at run-time or any other configuration of SQL Server running locally that provides a live database.
There are many options, all of which depend on your application design.
-Peter
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