Select this option to create two Microsoft SQL Server databases. One database holds transactional and application (model) ...

Select this option to create two Microsoft SQL Server databases. One database holds transactional and application (model) data. The Application Object Server (AOS) connects to this database to perform transactions and uses the model data to render forms and reports.
The other database holds the baseline model store, which is used for upgrading X++ code. The baseline model store is also used for analyzing application patches before they are applied.