If you have a SharePoint UDC and want to embed SQL authentication into it, you need to enable that access from SharePoint. Say you have a InfoPath form, that uses a UDC you have stored in SharePoint, that UDC has a SQL account (like a service account) embedded in it, but when you view your InfoPath in Forms Services, you get an error.
Well, We need to tell SharePoint that its ok to allow for embedded SQL credentials, so here is how we do that.
Fire up your SharePoint Central Admin and go to Application Management. Under the InfoPath Forms Services section Click the Configure InfoPath Forms Services link
Next Look for the section entitled “Embedded SQL Authentication”. Make this option is checked and your form should now be able to display data from your UDC with embedded SQL Authentication.
