Cannot open user default database error message.

I am getting this error message in Visual Studio 2008 Standard Edition while working with the database on my local development machine:
The database 'C:\DOCUMENTS AND SETTINGS\USER\MY DOCUMENTS\VISUAL STUDIO 2008\PROJECTS\MAGIAN CREATIVE\APP_DATA\MAGIANDATABASE.MDF' cannot be opened because it is version 661. This server supports version 655 and earlier. A downgrade path is not supported.
Cannot open user default database. Login failed.

I am using SQL Server 2008 Express Edition and I just downloaded and installed the latest update. This did not help either.

I used the Copy Website tool within Visual Studio to copy the database to host server. It was working fine on my computer before I did this. I am assuming that the Copy Website tool has downloaded the database from the DASP server and replaced the database I created locally. It is on my local machine when trying to further develop the database that I am getting the error. Did the server convert the database to an older version somehow? Is there anything I can do?