If you have full control over the server you can also store the connection string in your Machine.Config. This can be handy if you have lots of applications which all work with the same DB server.
I'm not sure if its worth encrypting it since you have to access to the server in the first place to view the machine.config. And if your server's been compromised the Encyrption won't stop a hacker from pulling the credentials from the config file.
