Basicly it is not needed to create a own database and connect them by the Settings.  Module tables, procedures, views and functions could be created into the DNN Database, so the module could be easy installed and updated.  You can then Access your tables, procedures and views by the DNN DAL, DAL+ or DAL2.

If you create your own tables, procedures, views and functions in the DNN Database please use the placeholders of the databaseOwner and ObjectQualifier in form of:

{databaseOwner}[{objectQualifier}CompanyName_ModuleName_TableName]

To use the DNN database gives you the Change to create and change your tables, spocs, views and functions via T-SQL Scripting and using the DNN installer and Manifest file.  You want find more informations about the packaging for DNN Modules on the Wiki of this Portal.

If your module need to connect to a database of a other application I would more use Access the data by a Webservice or Webapi.  If you have to read data dirctly from a 2nd Database I would look into the dnnreport module (dnnreport.codeplex.com) for a sample how to create database Connection for your module.