Check your config.php file
These are common scripts that contain all your settings.
$dbhost = "192.168.1.1";
$dbuname = "xxxxx*";
$dbpass = "xxxxxxx";
$dbname = "whatever";
If the db and webserver are on the same machine then $dbhost would have been localhost, but since they are not then you place the IP of your database server.
Using phpMyAdmin edit your privileges for your db user for the "whatever" database and input the same IP for host.
You will see a performance hit when your site and db are not on the same server, but the lag is not too bad, of course this depends on several network factors.
HTH