How can you hide certain files on windows server from certain users or user groups? Is it at all possible?
Yes to some extent. Directories have a permission "List Folder Contents" which can be used to hide the files contained within. For files, you can stop the file data from being read by denying the "Read" permission, but to hide the very existence of individual files you have to revert to the no-so-useful "Hidden" attribute, which doesn't link to any form of permissions and is easily turned off/worked around.