Windows Authentication is good stuff, and rightly so many people are using it in their Reporting Services deployments. Lately, there has been quite a rash of questions that people have regarding the inability to connect to their data sources when using Windows Authentication. Usually the scenario is that they have RS on one box, their data is on another. When they are developing on the RS box, everything works fine, but when connecting from other machines they run into authentication issues.
This is not a situation which is unique to RS. The issue is usually the infamous "double hop" issue with IIS. In a nutshell, what happens is that the that credentials which are passed into IIS cannot passed to another machine for authentication. In RS, you have a couple of workarounds. You can choose to store the Windows credentials in our catalog where we will encrypt them and use them when establishing a connection to the data source. Or, you can configure your network to allow Kerberos delegation.