See if this help:
http://support.microsoft.com/default.aspx?scid=kb;en-us;811889
[HOW TO: Troubleshoot the "Cannot Generate SSPI Context" Error Message]

>Hello UT,
>I have a problem that I can not figure out how to solve.
>
>I have a vfp80 application that connect to sql server.The application is installed on a windows XP machine.
>Tha application has a login screen.
>When I login for the first time everything is fine. I connect successfuly to sql server running which is running on another machine.
>But the problem is when i logout and try to login back. I get the following error :
>

>connection error :
>cannot generate sspi contex
>

>
>Here is my connection string
>

>ConnectString=DRIVER=SQL*SERVER;Trusted_Connection=YES;SERVER=WS3\VSDOTNET;DATABASE=SAMPLE
>

>
>Any help is greatly appreciated,
>
>Thanks,
>Sergio