Hey Chaffed,
Thanks for the question. It sounds like you are setting up Remote app utilizing the instructions for an earlier version of iTunes:
iTunes (9.2.1 or earlier)
1. Open iTunes on your Mac or PC.
2. Connect iPhone, iPad or iPod touch to a Wi-Fi network that is connected to the local network that your Mac or PC is also connected to.
3. Open the Remote app on your mobile device.
4. Select Add an iTunes Library in the Remote settings screen.
5. Remote app will display a 4 digit passcode. In iTunes select the name of your iPhone or iPod touch in the Devices list and enter the passcode.
Remote app will be paired with iTunes and you can begin browsing your library using Remote app and select a piece of content to play.
You may want to make sure iTunes is up to date (as well as the remote app). With iTunes 10 or later, remote app is setup using Home Sharing:
Setting up Remote app
Remote app 2.0 or later uses Home Sharing for setup and control with iTunes 10.0.1 and/or Apple TV (2nd and 3rd generation).
iTunes (10.0.1 or later)
1. Open iTunes on your Mac or PC.
2. iTunes 11 or newer: Turn on Home Sharing in iTunes by going to File > Home Sharing> Turn on Home Sharing.
- iTunes 10.7 or older: Turn on Home Sharing in iTunes by going to Advanced > Turn on Home Sharing.
3. Connect iPhone, iPad or iPod touch to a Wi-Fi network that is connected to the local network that your Mac or PC is also connected to.
4. Open the Remote app (software version 2.0 or later) on your mobile device.
5. Turn on Home Sharing in the Remote Settings screen. Make sure to sign into the same Home Sharing account you used to sign in to from iTunes on your computer
About Remote app for iPhone, iPad, and iPod touch
http://support.apple.com/kb/HT1947
Thanks,
Matt M.