This problem is due to the local ISP blocking SQL traffic on port 1433. A number of ISPs are doing this as a response to the recent SQL worm attack.
Unfortunately there is little we can do to fix this situation as the affected networks are outside our control. We recommend users contact their ISP directly and ask that they remove blocks on 1433 to allow their SQL connections to occur.
Even if port 1433 is blocked you will still be able to ping the database server. The affected ISPs are allowing ping traffic through their networks but are blocking SQL traffic.