The Database Components installation option in Setup installs the software that configures the Microsoft SQL Server database to work with Microsoft Dynamics NAV 2009.
If SQL Server is not present on the computer where you install the database components, Setup installs SQL Server Express 2005, which is an appropriate database option for prototyping and testing, but will likely prove inadequate for all but the smallest production environments.
Database components are installed when you select the Database Components Installation Option in Microsoft Dynamics NAV Setup.