Yes, you need MySql version 4.1.2 or greater. http://ww.wp.xz.cn/about/requirements/
Ok, so it does have to be on the same server though? Meaning I can’t have WordPress on server1 and MySql on server2?
No, the database engine might run on a separate server.
The name of the server is given at setup time, and resides in wp-config.php. The default server name is “localhost”, wich means “this server”. Change it to whatever server that runs a MySql instance you can access, and create your database there. This service must of course accept network access.