not able to sent mail

The message "contact your administrator" means you'll find description of the error in the log file.

If you don't have a local smtp server, yes you should find a remote server

The smtp server must be configured in the global parameters screen.
The value in the config.php file is just the default value proposed on setup. It is not used after first installation.
There are two possibilities :
1) you have a local smtp server : let the 'localhost' as parameter should work
2) you don't have a local smtp server : you must get a remote smpt server and specify its location in the parameter. Some providers give you a smtp server. For instance, free proposes smtp.free.fr (not very quick, but works).

On linux servers your are more likely to be in situation 1 : sendmail is installed by default on most linux distributions.
On windows, you will always be in situation 2. No smtp server is setup by defaut, and even if you install one locally, it will not be locally reachable from PHP.