Do I need a domain controller for multiple PCs accessing the same SQL server db? How do I configure it?
do I need a DC?

No you can use SQL Authentication, or Windows Auth (NTLM) with &quot;workgroup auth&quot;.  And to use a DC you would have to join both of your boxes to the domain, so I wouldn't bother.

is this DC something that comes with the windows images?
is this DC something that comes with SQL Server?
is this an application which I'll need to install separately?

Domain Controller is a feature of Windows Server, and is not available on the client editions of Windows, like Windows 7 or Windows 10.

(I initially thought that if I'm installing sql server on PC1, I will have to insert the windows credentials from the PC2 and this will suffice)
could you please give me step-by-step on how to make this work?

If you create a local user on both boxes that has the same password, you can use Windows Integrated Auth for SQL Server.  This is the &quot;workgroup auth&quot;, and it would enable accessing File Shares and other services between the computers.