How to setup domain trust between 2 domains?

we have 1 server (abc.local)  in our office running server 2003, it's the only server and running all the roles. We just acquired another company (xyz.local) and they have their own domain (they also only have 1 server 2008 and running all the roles)

I already setup site to site vpn between 2 sites, so there is no problem for me to access the other server's files and folders. Just wondering how do I setup so that users from the other company can access resource using their existing credential and I also want to setup permission on the shared folders with the existing AD account.