How to setup certificate authentication for MS SQL server 2008 R2?

I have to connect an (ADO) application running on a standalone Windows 2003 R2 server to a SQL 2008 R2 database that is a member of the domain.

I have setup an SQL authentication account for this and hard-coded the password into the connection string but I wonder if it wouldn't be possible to use certificate-based authentication for this instead. I haven't been able to find any documentation regarding this apparently new functionality of SQL 2008 R2 anywhere.

Could someone kindly point me at some good documentation ? Or at least a description of the functionality and whether it could be used in my case or not ?

Thank you in advance