Create Linked Server using Active Directory account
The two most common scenarios for security via a linked-server are:

Create a SQL login on the target SQL Server, and use that login in the definition of the linked server.  You then GRANT and DENY access to that login on the target server objects as necessary, using the principle of least privilege.

Define the SQL Server to allow &quot;pass through&quot; authentication by configuring security to &quot;be made using the login's current security context&quot;.   This allows security to vary amongst users and is far more flexible.  From MSDN:



Instead of having to use sp_addlinkedsrvlogin to create a predetermined login mapping, SQL Server can automatically use the Windows security credentials (Windows login name and password) of a user issuing the query to connect to a linked server when all the following conditions exist:

A user is connected to SQL Server by using Windows Authentication Mode.

Security account delegation is available on the client and sending server.

The provider supports Windows Authentication Mode; for example, SQL Server running on Windows.



In order to use option #2 above, in a multi-hop authentication scenario, you'll need to enable several things to support Kerberos Authentication.  MSDN has a great blog on the requirements, available here
You may also want to look at this question.