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IN Database connections, the "Server" field is where the connection will originate from. If your BuildMaster server can talk to database (i.e. has both network access, permission, and drivers), then it's usually simpler to enter the connection string and not worry about installing an agent. It's not a problem to install the agent, it's just not always necessary.
Of course, if you need to do other things such as transfer files, then an agent will come in handy.