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I downloaded the update patch 2.0.6 to 2.0.7 and FTP'd it to my server, I the went to upgrade and when I go to my site now, I get the following error:
Hope you still have a good backup file. Upgrading from 2.0.6 to 2.0.7 only needs overwriting the files and
UPDATing the system module if there are changes to the template files. That is all and the instruction is pretty clear.
It seems that you have gone through the install process again which are not required.
If you had to re-install, make sure you have the correct db name and password, as Tom has already pointed out.
BTW, remove your install directory once you are done. You are asking for hacking to your site by leaving it there.