The error is saying that it cannot connect to the SMTP Server. THE SMTP Server is the email server that will send the email to the recipient.
the way the forgot password function works is this:
It takes the email address for the user from the database, complies the email message with the To address, From Address, Subject and email body headers.
it then passes this complied email to the SMTP server.
The SMTP Server then relays the email message to the TO Address.
From the blue host site, it looks they require authentication to be used for connecting to the SMTP Server:
On the forgot password page, open the server behaviors panel and double click the Email Password server behavior to edit it.
On the Mail Object tab, change to using PEAR Mail for SMTP, refer to the blue host page i linked to for the settings you will need to use.