As a best practice, SharePoint should be installed using a SQL alias.

Think of a SQL alias like a DNS record, but also being able to refer to a specific SQL instance name.

If you need to upgrade database servers in the future, you will usually be keeping the existing DB server in place, and creating a separate DB server environment (e.g. SQL 2005 vs SQL 2008). If you had your SharePoint installation configured with the server name details of the SQL 2005 environment, then now you have to undertake a long and arduous process to move to 2008.

If you configured the environment with a SQL alias – then you can just go and update the alias on each of the SharePoint servers to point at the new SQL 2008 environment. Much simpler!!

Note: When installing SharePoint with a SQL alias, you need to make sure that you set up the alias on EACH and EVERY SharePoint server.  Miss one and the box won’t be able to connect to the required database server(s).

The command to bring up the SQL Alias Client Config Utility is: cliconfg