Windows Authentication is for the environment that all of your users are part of a Windows domain (have a Windows NT/2000 user account or is a member of a group). Your access to SQL Server is controlled by your Windows NT/2000 account or group, which is authenticated when you log on to the Windows operating system on the client.

If you have a mixed environment (e.g. Windows and Novell), then you have to use SQL Server Authentication where you will have to create a Login ID and Password in SQL Server.

Don't be confused with "Authentication" and "Authorization." The "Authentication" is dealing with user's connection to SQL Server and the "Authorization" is dealing with what data privilege a user has once he is connected to the SQL Server.

Secondly, don't be confused with "Authentication,"(think of it as a "method"), and "Authentication Mode." There are two kinds of authentication - Windows authentication and SQL Server authentication. And there are two kinds of authentication mode - Windows authentication mode and mixed authentication
mode.

The Windows authentication mode only allows you to login/connect to SQL Server with Windows authentication. The mixed authentication mode allows you to login/connect to SQL Server with either Windows authentication or SQL Server authentication.

Again, if your environment is pure Windows, then you should use Windows authentication mode, which uses Windows authentication to login/connect to SQL Server. If your environment is not pure Windows, like Novell and Windows, then you have to use mixed authentication mode, which will prompt you, during connection, to choose either Windows authentication or SQL Server authentication to connect to SQL Server.

If you are a member of Windows' administrator group then, it doesn't matter if you are using Windows authentication mode or mixed authentication mode, you should be able to use Windows Authentication to connect to SQL Server. However, what you can do after the connection depends on what you have been authorized.

you can get more details at:
http://database.ittoolbox.com/groups/technical-functional/sql-server-l/windows-authentication-vs-sql-server-authentication-89004