It depends on what you mean by "common"...for most sites, having "localhost" as the address of the DB is pretty common; however, in bigger companies it's not uncommon to have one machine soley as a dedicated database server...in fact, the compant I do network administration for just bought a new server strictly to instal SQL Server 2003 on it because the current on is also the domain controller and terminal services server (talk about multitasking!).
It should not cause any problems for you; just type in the hostname of the server like anything else...say Google had a MySQL database on google.com, then you just type "mysql_query("google.com", "user", "pass")".
