Given the generating functions:
$f(x) = (1-x)^r = \Sigma_{i=0}^\infty a_i x^i$
$g(x) = \frac{1}{(1-x)^{r+1}} = \Sigma_{i=0}^\infty b_i x^i$
$h(x) = f(x) \cdot g(x) = \frac{1}{1-x}$
The factor of $x^k$ in $h(x)$ is $1$ according to:
$\frac{1}{1-x} = \Sigma_{i=0}^\infty x^i$
On the other hand, if
$h(x) = \Sigma_{i=0}^\infty c_i x^i$
then by multiplication of generating functions:
$c_k = \Sigma_{i=0}^k a_i b_{k-i}$
How can we show that $c_k = 1$ based on the a's and the b's?
Hint:
$a_i = (-1)^i \left(r \atop i\right)$ if $0 \leq i \leq r$, and $a_i=0$ for $i > r$
also:
$(\frac{1}{1-x})^{n} = [\Sigma_{i=0}^\infty x^i]^{n} = \Sigma_{i=0}^\infty D(n,i)x^i$
where: $D(n,i) = \left(n-1+i \atop i\right)$
so: $b_i = D(r+1, i) = \left(r+i \atop i\right)$
How can we show $c_k = \Sigma_{i=0}^k a_i b_{k-i}$ is equal to $1$?
I will state the identity as follows:
$$ \sum_{i+j = n} (-1)^i \binom{r}{i} \binom{r+j}{r} = 1.$$
For any subset $A$ of $\{ 1,2, ... , r \}$, let $S_A$ be the set of solutions to the inequality $x_1 + ... + x_r \le n$ with $x_i$ non negative integers (for any $i$) and $x_i$ is positive for any $i \in A$.
By the principal of inclusion exclusion, we have
$$ \sum_{ A \subseteq \{ 1,2, ... , r\} } (-)^{ |A|} |S_A| = | ( S_{ \{ 1 \} } \cup S_{ \{ 2 \} } \cup ... \cup S_{ \{ r \}})^c |,$$ where the complement is with respect to the set of all non-negative solutions to $x_1 + ... + x_r \le n$.
I claim that this is equivalent to your identity. The RHS is 1 because the complement of $S_{\{ 1 \} } \cup ... \cup S_{\{ r \} }$ is the set consisting of the "trivial" solution $x_1=x_2=...=x_r=0 $. This is the RHS of your identity - it counts the size of this complement.
To see that the LHS's agree, think of the index $i$ as the size of $A$ (I leave this as an exercise).