Setting up the Mysql part

I am still a novice at this.

So, when you are doing the Configuring Mysql part you create a data base

create database moodledb;

Then create a user for Moodle

Create user 'moodle_user'@'localhost identified by 'password1';

If your Mysql is on a seperate machine from moodle its self do you change the localhost part to the IP of the machine hosting Moodle?

(Windows08 server, IIS7)