SSRS - HTTP 401: Unauthorized With the Reporting Services Web Service

Solution:
You would have to change the reporting services authentication mode to "Basic" from Windows. 

Open RSReportServer.config (by default, C:\Program Files\Microsoft SQL Server\MSRS10.MSSQLSERVER\Reporting Services\ReportServer) and replace 

<Authentication>
<AuthenticationTypes>
<RSWindowsNTLM/>
</AuthenticationTypes>
<EnableAuthPersistence>true</EnableAuthPersistence>
</Authentication>

with following entry -

<AuthenticationTypes>
<RSWindowsBasic/>
</AuthenticationTypes>