I am talking about .Net Framework 2.0 and .Net Framework 1.1

When accessing SQL Database through ADO.Net C#, in the connection string when we specify Windows Integrated Authentication. i.e. "INTEGRATED SECURITY = SSPI" , what exactly happens... Does the .Net Framework , access SQL Database through a <machineName>\ASPNET account...   This is in the scenario when the Database is residing on the same server as the host . I know that ASPNET user is a local system account.

Now in the Scenario where in the Database is placed on a different Server, I think it uses NT Authority\System account to access the SQL Database from a different Server..

Is my understanding totally wrong in both the scenarios.. Can I get a good link which exactly describes what exactly happens inside...

Was it working differently in .Net 1.1 and differently now in .Net 2.0

All processes run under a specified user account, and the security permissions for that user account define what the application can and cannot access.  When you are dealing with a web application that is not using impersonation, the account it's running under is the account associated with the application pool. 

If you attempt to access a database on another server, it's still going to use the application pool account (as far as i know), so if it's a domain account it should be able to authenticate.  If it's a local account, you may run into problems (sometimes you can get it to work by setting up two local accounts with the same name/password).

Not sure what the differences are between 1.1 and 2.0, the scenario described above is 2.0.