There are a few things you need to setup first in order to display no data template, first you need an actual data source that returns null or empty, if you are just doing this for checking purpose and want to avoid an actual data source then the code provided by ItsPete is good. Also you need to place EnableNoRecordsTemplate="true" in the MasterTableView tags.
Take a look at this code.
<telerik:RadGrid ID="RadGrid1" runat="server" GridLines="None"
DataSourceID="SqlDataSource1">
<MasterTableView EnableNoRecordsTemplate="true" ShowHeadersWhenNoRecords="false"
AutoGenerateColumns="False" datakeynames="ID" datasourceid="SqlDataSource1">
<NoRecordsTemplate>
No Data Found.
</NoRecordsTemplate>
<Columns>
<telerik:GridBoundColumn DataField="ID" DataType="System.Int32"
DefaultInsertValue="" HeaderText="ID" ReadOnly="True" SortExpression="ID"
UniqueName="ID">
</telerik:GridBoundColumn>
<telerik:GridBoundColumn DataField="NAME" DefaultInsertValue=""
HeaderText="NAME" SortExpression="NAME" UniqueName="NAME">
</telerik:GridBoundColumn>
<telerik:GridBoundColumn DataField="PASSWORD" DefaultInsertValue=""
HeaderText="PASSWORD" SortExpression="PASSWORD" UniqueName="PASSWORD">
</telerik:GridBoundColumn>
<telerik:GridBoundColumn DataField="DEPARTMENT" DefaultInsertValue=""
HeaderText="DEPARTMENT" SortExpression="DEPARTMENT" UniqueName="DEPARTMENT">
</telerik:GridBoundColumn>
</Columns>
</MasterTableView>
</telerik:RadGrid>
<asp:SqlDataSource ID="SqlDataSource1" runat="server"
ConnectionString="<%$ ConnectionStrings:Conn %>"
SelectCommand="SELECT * from Users WHERE ID = '0'">
</asp:SqlDataSource>
Data columns here are irrelevant (Just example). For more information about RadGrid, visit "Tips for using the RadGrid - Empty Data Message".