Create Local SQL Database Questions

Hi, I would like to create and use an SQL database but have many questions regarding this topic.

How Do I Create The Local SQL Database File?

I am working on a project where I have a datagridview and instead of binding the database to the control(s) I want to be able to use the SQL database as a file that I can load the data from.
I am doing this so I can also be able to load/edit and otherwise manage other SQL database files in a similar way.

Ok and would this be a service based database? Like Database1.mdf?

Also could I technically use an SQL file with the .sql extention?
I am assuming that I would not be wanting to do this since it is not meant to do it this way which is why it is name .mdf which is microsoft data file..
Just asking though.

~Thanks