You need to set up the database in mysql this is what the package is doing.
the meanings for the above are :-
MySQL server name: This is where we specify the location of the MySQL database.. 99% of the time this will be localhost if run on the same machine or the ip address if another machine on the network.
MySQL username: This is the Username for your MySQL database. You set this up with Mysql Admin or PHP Admin
MySQL password: This is the password for your MySQL database. You set this up with Mysql Admin or PHP Admin
MySQL Database name: This is the name of your MySQL database. call this what you like.
MySQL Database prefix: This is a prefix to the table names in your database. It enables you to run more than one application on a single MySQL database. You should generally leave it as smf_, unless you are installing a second copy of SMF on the same database.
There is a full manual about this package at
http://docs.simplemachines.org/index.php