Best Practices for securing a REST API / web service

You may also want to take a look at OAuth, an emerging open protocol for token-based authorization specifically targeting http apis.

It is very similar to the approach taken by flickr and remember the milk "rest" apis (not necessarily good examples of restful apis, but good examples of the token-based approach).

As tweakt said, Amazon S3 is a good model to work with. Their request signatures do have some features (such as incorporating a timestamp) that help guard against both accidental and malicious request replaying.

The nice thing about HTTP Basic is that virtually all HTTP libraries support it. You will, of course, need to require SSL in this case because sending plaintext passwords over the net is almost universally a bad thing. Basic is preferable to Digest when using SSL because even if the caller already knows that credentials are required, Digest requires an extra roundtrip to exchange the nonce value. With Basic, the callers simply sends the credentials the first time.

Once the identity of the client is established, authorization is really just an implementation problem. However, you could delegate the authorization to some other component with an existing authorization model. Again the nice thing about Basic here is your server ends up with a plaintext copy of the client's password that you can simply pass on to another component within your infrastructure as needed.

There are no standards for REST other than HTTP. There are established REST services out there. I suggest you take a peek at them and get a feel for how they work.

For example, we borrowed a lot of ideas from Amazon's S3 REST service when developing our own. But we opted not to use the more advanced security model based on request signatures. The simpler approach is HTTP Basic auth over SSL. You have to decide what works best in your situation.

Also, I highly recommend the book RESTful Web Services from O'reilly. It explains the core concepts and does provide some best practices. You can generally take the model they provide and map it to your own application.