Client cannot connect to an instance of Application Object Server

When a client cannot connect to an Application Object Server (AOS) instance, one of the following may be the cause:

AOS is starting

The AOS Windows service can take several minutes to start after installing for the first time. To determine whether the AOS service has completed its startup, either open the event viewer (Administrative tools > Event viewer) or the Services program (Administrative tools > Services), and review the status of the Dynamics service.

Port is not open

If the Application Object Server instance is installed on a computer with a firewall, be sure that the port you are trying to connect to is open. The default port 2712, but additional instances may install incrementally onto ports 2713, 2714, and so on.

MDAC components are not the same version

If different versions of the Microsoft Data Access Components (MDAC) are installed on the client, Application Object Server (AOS) and database, you may experience client connection failure or sporadic disconnecting of the client, AOS, or database.

For more details of the installation issues you can refer :
http://msdn.microsoft.com/en-us/library/aa497072(v=ax.10).aspx