It can be a file, a particular database on a DBMS, or even a live data feed. The data might be located on your computer, or on another computer somewhere on a network. For example, a data source might be a Microsoft SQL Server running on a Windows operating system; an IBM DB2 DBMS accessed through a gateway; a collection of Xbase files in a server directory; or a local Microsoft Access database file.
The purpose of a data source is to gather all of the technical meta data needed to access the data - the driver name, network address, network software, and so on - into a single place and hide that technical meta data from the user. The user should be able to look at a list that includes Material, Sales Organisation or Employee, choose Material from the list, and have the BI application connect to the Material data, all without knowing where the data resides or how the application got to it.