It's downloaded probably because there is not Adobe Reader plug-in installed. In this case, IE (it doesn't matter which version) doesn't know how to render it, and it'll simply download the file (Chrome, for example, has its own embedded PDF renderer).
That said. is not best way to display a PDF (do not forget compatibility with mobile browsers, for example Safari). Some browsers will always open that file inside an external application (or in another browser window). Best and most compatible way I found is a little bit tricky but works on all browsers I tried (even pretty outdated):
Keep your but do not display a PDF inside it, it'll be filled with an HTML page that consists of an tag. Create an HTML wrapping page for your PDF, it should look like this:
Of course, you still need the appropriate plug-in installed in the browser. Also, look at this post if you need to support Safari on mobile devices.
1st. Why nesting inside ? You'll find the answer here on SO. Instead of a nested tag, you may (should!) provide a custom message for your users (or a built-in viewer, see next paragraph). Nowadays, can be used without worries, and is useless.
2nd. Why an HTML page? So you can provide a fallback if PDF viewer isn't supported. Internal viewer, plain HTML error messages/options, and so on...
It's tricky to check PDF support so that you may provide an alternate viewer for your customers, take a look at PDF.JS project; it's pretty good but rendering quality - for desktop browsers - isn't as good as a native PDF renderer (I didn't see any difference in mobile browsers because of screen size, I suppose).
