If you are using SQL Server 2000, System.Transactions.TransactionScope
will cause all transactions to be promoted to Distributed Transactions, requiring MS Distributed Transaction Coordinator to be running.
You can fix this by starting the MSDTC service, upgrading to SQL Server 2005, or implement something like my codeproject solution: http://www.codeproject.com/KB/database/typed_dataset_transaction.aspx
I've never needed to do it, but you should also check Ocdecio's answer for configuring the network security settings for DTC, too.