I assume you already created the SQL Azure database. The next steps are:
- Go to the Azure Management Portal (manage.windowsazure.com) and navigate to the database you created
- At the bottom of the main page there is the name of your server. Example: somecode.database.windows.net,1433. You must put this as "Server name" when you create the new connection.
- Still in the main page, click on the link "Set up Windows Azure firewall rules for this IP address" to allow your local pc to access the sql azure server
- In the "Logon to the server" section, you need to check "Use SQL Server Authentication" and put username and password that you set when you created your SQL Azure database.