An error has occurred while establishing a connection to the server.

1) SQL Server should be up and running.
Go to All Programs >> Microsoft SQL Server 2008 >> Configuration Tools >> SQL Server Configuration Manager >> SQL Server Services, and check if SQL Server service status is “Running”.

2) Enable TCP/IP in SQL Server Configuration
When two or more SQL Servers are connected across network they do all communication using TCP/IP. The default port of SQL Server installation is 1433. This port can be changed through SQL Server Configuration Manager. TCP/IP should be enabled for SQL Server to be connected.
Go to All Programs >> Microsoft SQL Server 2008 >> Configuration Tools >> SQL Server Configuration Manager >> Select TCP/IP. Right Click on TCP/IP >> Click on Enable

You must restart SQL Server Services for all the changes to take effect. Right click and go to menu properties to select location where default port of SQL Server can be changed.

3) Open Port in Windows Firewall
Windows Firewall is very efficacious in protecting the Operating system from all sorts of malicious attacks. By default, many of the ports and services are refrained from running by firewall. Time and again, SQL Server ports are not open in firewall as well. All the ports on which SQL Server is running should be added to exception and firewall should filter all the traffic from those ports. As described, by default SQL Server runs on port 1433, but if default port is changed then the new port should be added to exception. If SQL Server has named instance (another instance besides default instance) is installed, SQL Server browser should also be added to the exception, as described in Step 7.
Go to Control Panel >> Windows Firewall >> Change Settings >> Exceptions >> Add Port

I had faced and searched a lot in web and fixed by the steps above.