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Excel vs database
(sh.itjust.works)
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Obviously they should be using Microsoft Access (this is a joke).
They generally mean to use a separate database application, that runs on a server. This will have access controls, multi user access and depending on the database, an enforced schema.
SQL is a query language that is generally used for relational databases. There are also a lot of databases that don't use sql, for various reasons. A relational database and SQL is a good place to start learning about databases though. Postgres is a really common one these days.
As far as using a database, you'd need to set up a database - you can find guides as to how to do this locally. You can then run queries against it using the command line or an application like pgAdmin. You could also make a program that utilizes it.