Microsoft incorporated a feature within Central Administration for SharePoint 2010 to prevent files to be opeed within the browser.
Engineering helped to solve it. But once in a while a site would still behave differently than what we wanted it to. So this is what I did in those situations.
First I would make sure that my Adobe was set up for opening the files in the browser. To check this, I would open any PDF file and then I would select Preferences at the Edit menu. Then I would select Display PDF in browser (under Web Browser Options).
Back in my SharePoint site I would try again. If the step above would not solve it, then I would contact someone in Engineering to fix it for me since I didn't have access to Central Administration and that's where the setting I needed changed was.
In case you are curious as of what actually this setting is, I'm talking about the Browser File Handling setting within Manage Web Application within Central Admin, which in our case was set to ‘Strict,’ preventing the files from being opened in the browser. In order for PDF files to be opened in a browser window, that setting should be set to ‘Permissive.’