Either the database server or your application can handle data import.
To create the database, create the SSIS package (the answer is above the recommended DTS, but the DTS is deprecated). The easiest way to do this is to use SQL Server Management Studio to "Import" data into the database (right-click on the database and select "Tasks"). The last import step allows you to save the import settings as an SSIS package. Then you run the SSIS package from your application.
Your application can also handle it in several ways. Windows comes with an ODBC driver for Excel files, or you can use the Excel API to open a workbook in your application, transfer data to your application, and then write to the database. The ODBC route is probably implemented faster if all the data you need is just text from a sheet (if you need to evaluate formatting or go beyond just getting text data, you should use the API).
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