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On the "client". The client may be a Windows desktop or a big Linux/Unix Application Server.
However, in recent versions, the TNSNAMES.ORA file is not mandatory as there are other options.
The TNSNAMES is one of several naming methods.
The connect descriptor can be provided on the command line itself, thus not requiring a tnsnames.ora file.
EZCONNECT strings also do not require a tnsnames.ora file.
See "Understanding Naming Methods" at http://download.oracle.com/docs/cd/E11882_01/network.112/e10836/concepts.htm#CIAHJEDI
and the chapter "Configuring Naming Methods" at http://download.oracle.com/docs/cd/E11882_01/network.112/e10836/naming.htm#i507143
Hemant K Chitale