The Database Components option is available on the Choose an installation option page in Microsoft Dynamics NAV 2009 Setup.
The components in the Database Components option, along with Microsoft SQL Server, represent tier three in the Microsoft Dynamics NAV three-tier. (The RoleTailored client is tier one, and the NAV Server is tier two.)
Setup cannot install an .mdf file (the data file for a database) to the SQL Server database server if the destination folder or drive is compressed.
What Setup installs on the target computer with this option depends on whether it finds SQL Server already present on the computer:
If SQL Server is installed on the computer, Setup installs software that Microsoft Dynamics NAV requires for interacting with SQL Server.
If SQL Server is not installed on the computer, Setup installs Microsoft SQL Server Express 2005, along with software that Microsoft Dynamics NAV requires for interacting with SQL Server Express. SQL Server Express is best for prototyping and for demonstration purposes. Any production system you design around SQL Server Express would have to be very small—typically five users or less.