You do not have a SMTP server running on your localhost. Just change the php ini settings. On windows it's normaly in the C:\Windows or C:\Winnt Folder.

Code:
[mail function]
; For Win32 only.
SMTP = Your.ISP.SMTP.Server; for Win32 only
Change it to your ISP SMTP server and then the error message you are recieve will disapear.