A quick search on the internet took me here: Choosing an Authentication Mode. And if you go down to the section Connecting Through Windows Authentication it points out a few important things and then even farther down the section Disadvantages of SQL Server Authentication has a bit more. Then I found a couple of good forum questions here and here. In summary (and only discussing actual security features):
Click through for the answers. Also read Cristian Satnic’s comments below, as Cristian is correct about wanting to keep passwords hashed instead of encrypted. Incidentally, Windows passwords aren’t encrypted, either—they’re hashed.