You can use MSDE, a SQL server compatible database engine that MS makes available for free. You can download and install MSDE from a whole variety of sources. Here is one source.

MSDE also comes with Visual Studio .NET and the .NET Framework SDK. It is available under

$(VS Install drive):\Program Files\Microsoft Visual Studio .NET
  \FrameworkSDK\Samples\Setup\msde

You can run

$(VS Install drive):\Program Files\Microsoft Visual Studio .NET
  \FrameworkSDK\Samples\Setup\configsamples.exe

to configure the Northwind database that the samples use.

Contributed from George Shepherd's Windows Forms FAQ