There's two ways of creating a database from a Physical Data Model. The first is to create a database directly from the Diagram Editor, the second is to execute a script yourself.
Create Database from Diagram Editor
You can start the Create Database wizard via the Tools Menu in the Diagram Editor.
As a first step, you'll be show the server selection dialog, after that the normal Create Database will be followed.
When the database is created at the server, the Diagram Editor will execute the script to create all tables and other database objects for you.
Extracting DDL
If you want to execute the script yourself, you can use the Extract DDL For All Objects option in the menu. This will extract the meta data statements for the database objects into a connection-less Script Editor.
Next, you can create a new database or connect to an existing database and execute the script.
This can be useful if you want to create multiple databases or if you want to save the script first.