You need to find out which smtp server your system is able to use for sending email, and then set the parameter accordingly. Most linux installations have one running locally, but maybe you don't - what's the setting for smtp server in your mail program, in case you use one on that machine?
You can also try to connect to the mailserver from the commandline with something like this:
tils@tp:~$ telnet localhost 25
Trying 127.0.0.1...
Connected to localhost.
Escape character is '^]'.
220 tils.net ESMTP
If you don't get a response like the one above than most likely there is no mailserver running on that system.
I hope that makes at least a bit sense.