here is what I understand when Oracle says connected to an idle instance
Microsoft Windows 2000 [Version 5.00.2195]
(C) Copyright 1985-2000 Microsoft Corp.

D:\>set oracle_sid=sridevi
-- at this stage there is neither service handler (Oracle executable)
-- nor an instance nor a database
D:\>sqlplus /nolog
SQL*Plus: Release - Production on Wed Jul 21 22:44:16 2004

Copyright (c) 1982, 2002, Oracle Corporation. All rights reserved.

SQL> connect sys/sys as sysdba
ORA-12560: TNS : protocol adapter error

-- ora-12560 was spit as there was no service handler
-- listener is up and running.
-- in the absence of service hadler or connect string no check can be done
-- to connect to oracle instance

SQL> connect sys/sys@sridevi as sysdba
ORA-12500: TNS:listener failed to start a dedicated server process

-- even though the connect string has the tns alias which is identifiable
-- as a service for service by listener.
-- The process of starting up a dedicated server process failed.
-- The executable could not be found or
-- the environment may be set up incorrectly
-- in this case the executable is not found as the service handler is not started.
-- I started the service for the oracle instance and set the environment and connected
SQL> connect sys/sys@sridevi as sysdba
Connected to an idle instance.
-- So I am connected to Oracle executable which is ready to serve a instance through a dedicated
-- service. but no instance is there
SQL> startup
ORACLE instance started.