Recently i was setting up development environment at home. When i had to connect SQL server remotely from another VPC, i could not connect it even after enabling allow remote connections on my Sql Server. the error messaage was...   An error has occurred while establishing a connection to the server. When connecting to SQL Server 2005, this failure may be caused by the fact that under the default settings SQL Server does not allow remote connections. (provider: SQL Network Interfaces, error: 26 - Error Locating Server/Instance Specified)   
 for some reason it did not work as suggested by many..   but after banging my head to wall... cpu and then to lcd monitor, figured the solution.   but dont worry, figured what was the problem at last……… 


 the probelm is the Instance name from the client is not resolved, to do that follow the below shown steps.  
1. Navigate to C:\Windows\System32\drivers\etc
2. Open hosts file in notepad
3. Add the entry at the end of line, as i did for example   192.168.131.65 KSSQLSRVR 192.168.131.65 KSSQLSRVR\SPDEV01 
 those were my instances i am tried to connect remotely  

sweeeeet... it worked!   should work for anyone who have this problem...