EXEC_SQL is the parallel to DBMS_SQL in the database.
It is trying to open a database connection.
Forms 6.0 was client/server, so it was up to the local PC to resolve the connection string.
Forms 10g is web-based, so in Production this will be up to the application server machine.
If you are just testing the form locally, you may be using that local 'pretend' app server, in which case it will be the local PC trying to resolve the connection string.
The design question is what is this 'batabase' database about, where does it sit, and how will the application talk to it