When developing applications that utilise Windows Azure storage, you will more than likely want to develop locally before deploying to the cloud.

Luckily, the Windows Azure SDK includes an offline storage simulator, called the “development storage” service. Development storage simulates the Table, Blob and Queue storage services in the cloud. The development storage service uses a database contained in a local SQL Server instance. The SDK will install SQL Server Express for you if you don’t already have it.

If you have a different version of SQL Server, or a different instance name from the default, you can create the database manually by calling the “dsInit” utility from the Windows Azure SDK command prompt.

You must supply the name of the SQL Server instance you want to use via the “/sqlinstance” argument e.g. dsInit /sqlinstance:INSTANCENAME

This will produce the following dialog:

Note: you can also specify the “/forcecreate” argument to overwrite an existing database and reset it to it’s initial state.

More information about Development Storage and the dsInit utility can be found on this MSDN page.