There seems to be a lot of confusion about the correct http status code to return if the user tries to access a page which requires the user to login.
So basically what
I believe 401 is the correct status code to return from failed authorization. Reference RFC 2616 section-14.8 It reads "A user agent that wishes to authenticate itself with a server-- usually, but not necessarily, after receiving a 401 response"
You ask for "the best", "the right way", and "the correct", in turn, which makes answering this question difficult because those criteria are not necessarily interchangeable and may, in fact, conflict -- especially where RESTfulness is concerned.
The "best" answer depends on your application. Are you building a Plain Old Browser-Based (POBB) web-application? Are you building a native client (ex. iOS or Android) and hitting a service over the Web? Are you making heavy use of AJAX to drive web-page updates? Is curl the intended client?
Let's assume you are building a traditional web application. Let's look at how Google does it (output chopped for brevity):
$ curl -v http://gmail.com/
< HTTP/1.1 301 Moved Permanently
< Location: http://mail.google.com/mail/
< Content-Type: text/html; charset=UTF-8
< Content-Length: 225
< ...
Google first redirects us to the "true" URL for GMail (using a 302 redirect).
$ curl -v http://mail.google.com/mail/
< HTTP/1.1 302 Moved Temporarily
< Location: https://accounts.google.com/ServiceLogin?service=mail&passive=true&rm=false&continue=http://mail.google.com/mail/&scc=1<mpl=default<mplcache=2
< Content-Type: text/html; charset=UTF-8
< Content-Length: 352
< ...
And then it redirects us to the login page (using a 302 redirect).
$ curl -v 'https://accounts.google.com/ServiceLogin?service=mail&passive=true&rm=false&continue=http://mail.google.com/mail/&scc=1<mpl=default<mplcache=2'
< HTTP/1.1 200 OK
< Content-Type: text/html; charset=UTF-8
< Transfer-Encoding: chunked
< ...
The login page itself is delivered with the 200 status code!
Why this way?
From a user-experience perspective, if a user goes to a page they can't view because they are not authenticated, you want to take the user to a page that allows them to correct this (via logging in). In this example, the login page stands alone and is just another page (which is why 200 is appropriate).
You could throw up a 4XX page with an explanation and a link to the login page. That might, in fact, seem more RESTful. But it's a worse user experience.
Ok, but is there a case where something like 403 makes sense? Absolutely.
First, though, note that 403 isn't well-defined in the specification. In order to understand how it should be used, you need to look at how it's implemented in the field.
403 is commonly used by web servers like Apache and IIS as the status code for pages returned when the browser requests a directory listing (a URI ending in "/") but the server has directory listings disabled. In this case, 403 is really a specialized 404, and there isn't much you can do for the user except let him/her know what went wrong.
However, here's an example of a site that uses the 403 to both signal to the user that he/she doesn't have sufficient privilege and what action to take to correct the situation (check out the full response for details):
curl -v http://www.w3.org/Protocols/rfc2616/
< HTTP/1.1 403 Forbidden
< Content-Type: text/html; charset=iso-8859-1
< Content-Length: 1564
< ...
(As an aside, 403 is also seen in web-based APIs, like Twitter's API; here, 403 means "The request is understood, but it has been refused. An accompanying error message will explain why. This code is used when requests are being denied due to update limits.")
As an improvement, let's assume, however, that you don't want to redirect the user to a login page, or force the user to follow a link to the login page. Instead, you want to display the login form on the page that the user is prevented from seeing. If they successfully authenticate, they see the content when the page reloads; if they fail, they get the login form again. They never navigate to another URL.
In this case, a status code of 403 makes a lot of sense, and is homologous to the 401 case, with the caveat that the browser won't pop up a dialog asking the user to authenticate -- the form is in the page itself.
This approach to authentication is not common, but it could make sense, and is IMHO preferable to the pop-up-a-javascript-modal-to-log-in solutions that developers try to implement.
It comes down to the question, do you want to redirect or not?
Additional: thoughts about the 401 status code...
The 401 status code -- and associated basic/digest authentication -- has many things going for it. It's embraced by the HTTP specification, it's supported by every major browser, it's not inherently un-RESTful... The problem is, from a user experience perspective, it's very very unattractive. There's the un-stylable, cryptic pop-up dialog, lack of an elegant solution for logging out, etc. If you (or your stakeholders/clients) can live with those issues (a big if) then it might qualify as the "correct" solution.