Pass through authentication in SharePoint is simple in theory. You sign on only once. Your username and password, which are authenticated with the Windows NTLM protocol, should be enough to pass through to SharePoint for authentication. However, this does not always happen.
There are many integration features available through Office 2007 and SharePoint, but they rely on Windows authentication to work well. Without it, integration elements have a hard time performing as intended. So to minimize confusion, SharePoint offers an alternative mode whereby certain Windows authentication elements are removed. Anonymous access is the preferred method of authentication.
Additional detailed instructions can be found here.