well, of course you need to connect N770 over USB to (powered on :-) computer when you poweron the N770 with home key pressed. Then you must see the usb icon. If not then cable, n770 or your computer is broken.

It can be the cable, I've seen perfectly working mini-usb cable which did not work with N770 flasher. Then tried other two (one original, one from my digital camera) and both worked.