SQL Server Setup recognizes three file paths in allowing you to specify where the Microsoft® SQL Server™ files are installed. You may specify distinct file paths for both the program and data file locations. The default directory for both the program and data files is \Mssql7. The Setup program also installs files in the system directory. The system file location cannot be changed.
The program file location is the root directory where the Setup program creates the folders that contain program files and files that typically do not change as you use SQL Server. Although these files are not read-only, the folders do not contain data, log, backup files, or replication data; therefore, the space requirements should not increase as SQL Server is used.
Note Program files cannot be installed on a removable disk drive.
The data file location is the root directory where the Setup program creates the folders that contain database and log files, as well as directories for the system log, backup, and replication data. The Setup program creates database and log files for the master, model, tempdb, msdb, pubs, and Northwind databases. The SQL Server data file path should be located on a drive that has space available for these files to grow.
Note Data files cannot be installed on a file system using compression.