go to this site:
http://search.support.microsoft.com/search/default.aspx?Catalog=LCID%3D1033%26CDID%3DEN-US-KB%26PRODLISTSRC%3DON&Product=msall&Query=18452&Queryc=18452&withinResults=false&srchstep=0&KeywordType=ALL&Titles=false&numDays=&maxResults=25
(remove any spaces that might have gotten into the URL during copying)
Basically (Quoting MS)
CAUSE
This error can occur when the user's SQL Server authentication method is set to Windows NT Authentication Mode. If the authentication method is changed on the SQL Server computer, the changes do not take place until the next time the computer is restarted. This can also occur if you set up a SQL Server 2000 computer by using the Setup Wizard and perform a typical installation or byusing the Sqlins.iss file for a typical unattended installation. The default security authentication mode is Microsoft Windows NT Authentication, which is different from Microsoft SQL Server 7.0. In SQL Server 7.0, the default authentication is Mixed Mode (Windows NT Authentication Mode and SQL Server Authentication). For additional information, click the article number below to view the article in the Microsoft Knowledge Base:
Q269587 INF: Windows Authentication is the Default Security Mode
RESOLUTION
To change the authentication mode from Windows NT Authentication Mode (only) to Mixed Mode, use the following steps:
Open the Enterprise Manager.
Click to expand the server group.
Right-click the server name, and then click Properties .
Click the Security tab.
Under Authentication , click the SQL Server and Windows option button.
NOTE : You may need to retype the "SA" password in the DSN.
