This link mentions the following
"It’s important to note that users are responsible for the data they share: if a user connects to data sources using her credentials, then shares a report (or dashboard, or dataset) based on that data, users with whom the dashboard is shared are not authenticated against the original data source, and will be granted access to the report."
So does that mean, if I create a report based on Salesforce data (via connector) and share it with individual Sales Reps, they will see the entire report and not just the data that they have access to?
If yes, how else can user level security be setup so people only see what they should?
You are correct the sales rep will see the entire report. Your only other option at this time is listed below from the same article. You would have to load your sales force data into a SSAS tabular cube. You would then be able to implement role level security.
An exception is connections to SQL Server Analysis Services using the Power BI Analysis Services Connector; dashboards are cached in Power BI, but access to underlying reports or datasets initiate authentication for the user attempting to access the report (or dataset), and access will only be granted if the user has sufficient credentials to access the data. For more information, see Power BI Analysis Services Connector deep-dive
Hope this will be addressed though and row-level security functionality introduced. If not, it leaves a giant gaping hole in the solution that just won't be accepted by Business Users.