You have two authentication modes when loging into SQL Server 2005. SQL Server Authentication, and Windows Authentication. If you select Windows Authentication, it uses the credentials of the person currently logged in to the computer. The other option is SQL Server Authentication, and if that is selected, you have the option of selecting (or typing) the username and password with which you want to authenticate and log in to SQL Server. The user name list comes from the list of Logins you can create in SQL Server. There are default Logins (sa, NT AUTHORITY\SYSTEM and BUILTIN\Administrators) and you can create your own, either using Windows Authentication or SQL Server authentication.
Expand the Security node, then right mouse click on the Logins node, and select New Login. The New Login dialog will appear, and you can now create a new login based on Windows or SQL authentication.
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Author - Professional SQL Server 2005 XML