Chas,

This sounds like the standard approach to security in SSAS. I haven't gotten around to a video on that yet but here's basically what you need to do:

1. Create a new role and give it a meaningful name.
2. In the Membership screen, add the group you want in that role.
3. On the Cubes tab, give them Read access to the cube(s) in question.
4. On the Dimension Data tab, choose the hierarchies/attributes and then select or deselect members as needed. This will cover numbers 1 and 2.
5. On the Cell Data tab is where you set the measures and these are done in MDX. To give permissions to two different measures named Sales Amount and Tax Amt, you would check the "Enable Read Permissions" box and enter the following MDX: Measures.CurrentMember IS [Sales Amount] OR Measures.CurrentMember IS [Tax Amt]

A good place to start is here: http://msdn.microsoft.com/en-us/library/ms175408.aspx

Regarding dealing with security I'm stuck and really dont know how to implement the security in my app.

The scenario is:
The SSRS reports access SSAS cube to fetch and display data. These reports are embedded in a .net web application. The .net application manages user info itself i.e. using database. Is there a method by which only the .net application user can authenticate with the cube so that reports can view data. Just for info we are not allowed to create groups on the server. Only a local user account is created for our purpose.