Should I click 'use windows credentials'?

You need to create the users in FME Server before you can create a web connection using a new user. See

http://docs.safe.com/fme/html/FME_Server_Documentation/WebUI/User-Management.htm and linked pages for details.

Without performing any user set up there are the default users available: admin, author, user, guest, which have the same password as username (except admin if you changed it on first log-in as admin)

To use Windows Credentials you will have to configure FME Server to enable Single Sign-On http://docs.safe.com/fme/html/FME_Server_Documentation/AdminGuide/IWA.htm

Thanks that works