This does not work when your SQL Server is on a different machine than IIS – rboarman Aug 21 at 20:15
Correct. If it isn't, and if you are not in an active directory, then you have to create a user account on the server hosting your SQL. If you use SQL authentication, then you can create a simple SQL account. If not, you can use a windows account with the same username and password as the user account that the website is running under, but the website has to be running as a user with "Login as a Service" permissions