As far as a preferrence goes... This is up to each organization to decide. There are pros and cons with each.
SQL Server Authentication or Mixed Mode Authentication
Most of our customers use this authentication mode to connect to any number of SQL Server instances. Users are managed within each SQL Server instance by a Database Administrator. Within QIE the user and password are entered into the Database Connection form and QIE passes this to the JDBC driver to make a direct connection. In this mode it can connect to any SQL Server regardless of domain without additional external setup.
This is the easiest to use with QIE since you can connect to any number of third party database as the credentials are entered in the UI.
Windows Authentication
A few of our customers use this mode to connect QIE to a MSSQL database within the same domain. The users are managed at the OS and Domain Level by a Network Administrator. In this case QIE does not manage any credentials. The JDBC driver pulls the credentials from the OS for the user running the QIE service. We believe the only way to connect QIE to another domain using windows authentication would be to establish a domain trust between the two domains. However, we have no experience with the details of this type of setup and you would need someone with better knowledge in windows domains to get this working.
This is harder to use with QIE simply because the JDBC layer gets the credetials from the OS.
For additional comparisons between the two modes please see:
https://msdn.microsoft.com/en-us/library/bb669066(v=vs.110).aspx
https://technet.microsoft.com/en-us/library/aa905171(v=sql.80).aspx (This link contains some scenarios that might help)
See also:
How do you set up a database connection using windows authentication?
Does QIE support ODBC? Contains steps to connect using SQL Authentication
Questions using the database tag.
