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Instructions provided describe how to connect using a 3-tier connection when ArcGIS Desktop, ArcSDE, and a database are on the same machine. This is a workaround for occurances of a 3-tier connection failure when ArcGIS Desktop, ArcSDE (64-bit), and Database (64-bit) are all on same 64-bit machine.
This is a known issue.
If ArcSDE 64-bit is installed on the same server as a 32-bit client (for example, ArcGIS Desktop, ArcGIS Server, or ArcIMS), one of the following must be done:
If the client system variable is not set, the client and ArcSDE attempts to use the same shared memory, and the client connection to the geodatabase fails.