This could be a common problem who are not using SQL Express. If you run an Azure application you may find it seeks for SQL Express instance in your machine if you do not have already. You may also find "An error occurred while processing this request." error due to this reason while you try creating tables from your models by StorageClient.TableStorage.CreateTablesFromModel. All you need to do is fire up Visual Studio and open the config file for DevelopmentStorage at C:\Program Files\Windows Azure SDK\v1.0\bin\DevelopmentStorage.exe.config. Now modify the connection string and the dbServer attribute of the service tag for Table, and save.

  <connectionStrings>
    <add name="DevelopmentStorageDbConnectionString"
         connectionString="Data Source=.\SQLEXPRESS;Initial Catalog=DevelopmentStorageDb;Integrated Security=True"
         providerName="System.Data.SqlClient" />
  </connectionStrings>
  
  <appSettings>    
    <add key="ClientSettingsProvider.ServiceUri" value="" />
  </appSettings>
  
  <developmentStorageConfig>
    <services>
      <service name="Blob"
               url="http://127.0.0.1:10000/"/>
      <service name="Queue"
               url="http://127.0.0.1:10001/"/>
      <service name="Table"
               url="http://127.0.0.1:10002/"
               dbServer="localhost\SQLExpress"/>
    </services>
    ...

Restart Visual Studio and open up the Azure project again, now you should be able to run the DevelopmentStorage with the existing database installation of your PC.