The sql backup file needs to be on the same server as you wish to restore the database too.

To restore the database you just need to run a mysql command in the shell

Code:
mysql -h[database server] -u[username] -p[password] databasename < backupfile.sql
So if your database server is called db01.domain.co.uk, the database is called db1001, username is fred, password is cheese, and the database backup is called backup.sql, then the command would be:

Code:
mysql -hdb01.domain.co.uk -ufred -pcheese db1001 < backup.sql