>However, I don't understand why we need to set the default to Master. I mean I am creating a new database. I don't see the relation to set the default database to master.

SQL Server is meta-data driven. The meta-data is stored in the system databases with the majority and most important meta-data being stored in the master database. Every database contains some system tables which begin with sys. For instance, sysobjects contain one row for every object (table, view, stored procedure, etc.) in the database. The master database contains some additional system tables, one of which is sysdatabases. sysdatabases contains one row for every database on the server.

-Mike