Restoring a database is not working

If you have created the backup of a SQL Server 2008 database and are trying to restore it on a SQL Server 2005 instance, you will receive this error. You cannot do this.

Your best bet would be to script out the database (as long as all of the schema and objects are 2005 compatibile). You can't downgrade a database.

You need to fix the connection so it is using the SQL 2008 instance.

Try to run the SQL Server 2008 Express install program again, and during Name Instance configuration, specify a Name Instance with a different name. Example: MachineName\instancename

After installation, logged in with New Instance name created.

Try to create database, create tables for database and try to run restore again. It will work

Source: http://dotnetguts.blogspot.in/2010/06/restore-failed-for-server-restore.html