I am running webinator to index our site. And it is asking for the database to index. What database is this referring to is it a file on the server or is it the oracle database we're using for data gathering in conjuction with web forms?
It's not asking for the database to index, it's asking for the database into which to place the index. It's a directory under your Webinator installation directory. It tells you the default it wants to use. Just say yes to that.
It has nothing whatsoever to do with oracle. Webinator maintains it's own database.