I'm posting this as a solution to a problem we recently faced in case it helps anyone else.
We were having a problem accessing our internal WebADF applications after upgrading to ArcGIS Server 10.1. The site would prompt for login credentials even though we had Windows Authentication enabled. If valid network credentials were provided via Chrome or Firefox, we were able to access the application. However, Internet Explorer would not accept any credentials. Instead, the following error message would appear:
401 - Unauthorized: Access is denied due to invalid credentials
Here's what we did to fix the problem:
Login to the server
Open IIS Manager
Click Application Pools
Click ArcGISApplicationsAppPool (the name of the application pool used by our apps; yours may be different)
Click Advanced Settings???
Under Process Model, click the ellipsis for Identity
Change the Built-in account from the default value of ApplicationPoolIdentity to Network Service
We were then able to access our apps without providing credentials.
