This error occurs when you try to use a db login within a connection string on a server that has not been set up for mixed-mode (SQL Server and Windows security), ie when it is set to 'Windows only' authentication.
To fix this:
- Start Enterprise Manager,
- Right-click on the server and select Properties
- Select the Security tab.
- Select 'SQL Server and Windows' as the authentication mode.
- Click OK.
HTH
Tim