I spent some time playing with the security and Work Item Templates in TFS in an attempt to figure out how the "Assign To:" property works.
The Work Item Template allows you to edit the Suggested Values property of this field. Here is what I found:
<FIELD name="Assigned To" refname="System.AssignedTo" type="String" reportable="dimension">
<SUGGESTEDVALUES>
<LISTITEM value="[Project ]\Contributors" />
</SUGGESTEDVALUES>
</FIELD>
Displays in the dropdown:
All users in the Contributors Group
All Team Project Groups in the Contributors Group
All Windows Active Directory Groups in the Contributors Group
The "Contributors" Team Project Group
<FIELD name="Assigned To" refname="System.AssignedTo" type="String" reportable="dimension">
<SUGGESTEDVALUES>
<LISTITEM value="Contributors" />
</SUGGESTEDVALUES>
</FIELD>
Displays in the dropdown:
The "Contributors" Group
However, this is what I found when working with the "Assigned To" field:
(Steve is a Contributor in my Team Project and is part of the windows AD Group "MyProjectContributors" )
I create 3 tasks:
Task 1: "Steve"
Task 2: "Contributors" Team Project Group
Task 3: "MyProjectContributors" Windows AD Group.
In summary, Task 1 is assigned to Steve, Task 2 is assigned to the Team System Team Project group that Steve is a member of, and Task 3 is assigned to the Windows AD group that Steve is a member of.
I then logged into Windows as Steve and connected to MyProject.
When I ran the "Work Items - All Querys - All Work Items" query I saw my three new tasks.
When I ran the "Work Items - All Querys - My Work Items" query I saw only Task 1 - the task assigned explicitly to Steve.