How does the SQL Server JDBC Trusted Connection Authentication work? (ie how does the trusted connection authenticate the logged in AD user in such a transparent and elegant fashion and how can I implement a similar authentication solution for my client-server applications in Java without a database connection or any use of the existing SQL Server solution.)
Assumptions * Working within a Windows 2003 domain * You have access to the Windows API via JNI/JNA
Have you looked at this question? The situation seems to be similar to yours (connecting to a SQL Server database using Windows authentication).
It depends on the client. For example if you have a Web Browser, it can use the NTLM Authentication to pass the domain authentication of your current client to the server. In this case the browser like IE or FF supports this, and you web server needs the support for NTLM. For example here for Tomcat: http://jcifs.samba.org/src/docs/ntlmhttpauth.html
There is also the SPNEGO protcol in combination with Kerberos, as explained here: http://java.sun.com/javase/6/docs/technotes/guides/security/jgss/lab/index.html
If you have your own client, it depends on the client's framework if it is able to use the local user's security context and is able to pass it on. The page above describes this at least for a kerberos scenario.
Greetings Bernd
PS: I am not sure if you can pass the authentication context established with the jcifs/ntmlm solution to a backend component like SQL Server. It should work with Kerberos tickets (if configured).
jTDS and Microsoft JDBC Driver both offer native Windows Authentication.