For SQL Server you need to use a database account in the database connection that has the CREATE SEQUENCE and ALTER OR CONTROL permissions in the database you are trying to create the sequence in. The database owner should be able to grant those permissions, but they have to be granted through something like SQL Server Management Studio.
The "Create Sequence" checkbox you highlighted will create a new database sequence when the Generate ID attribute rule template is run. That sequence will have a random name, start at 1, and increment by 1. If you already have a database sequence you want to use, then you can uncheck that box. The Generate ID template is great for creating custom IDs. You can pick the prefix, suffix, padding, separators between those things, and vary things based on an attribute field.
"Not all those who wander are lost" ~ Tolkien