You have just come to the right place.
First and foremost, this application is to
test your ability to develop
Java software. It is not intended to be a perfect software or to make perfect sense (the binary database is an example of non-sense).
As for the local mode, it has to connect directly to the file locally (localhost won't do at all). And yes, the file has to be in the client side.
So, you will have two connection modes (mutually execlusive):
1- Network: u have to specify the server DNS name (or IP), and the port number. In my case I also added the name and path of the file on the server (for example c:\scjd\db\db.db)
2- Locally: you need to specify the file name and path (for example: c:\scjd\db\db.db)
Hope this helps
Best regards