Google's Orkut - yet another example of misuse of Flash
"You get an email notification (or find out on Orkut) that you have a new scrapbook entry. It's from a friend. It says.
2008 vem ai... que ele comece mto bem para vc
There's no need to click on anything, just viewing it does the trick. The scrap deletes itself, and adds you to the Orkut Community "Infectados pelo Vírus do Orkut". That group, as I write this, is gaining members at a rate of at least one hundred per minute."
From what I can gather after trawling myriad blog entries about the incident, it seems that the exploit worked in a similar manner to the more traditional malicious Flash advertisements. This blog entry has an interesting discussion about what was happening.
It certainly is becoming obvious that Flash is turning into the Typhoid Mary of the Internet. There is no way for end users to easy disable the functionality that allows malicious banner advertisements and Flash content such as was used in the Orkut incident. Yes, we can simply uninstall Flash, or use a Flash and advertisement blocker, but that doesn't solve the problem, does it. It simply hides it.
Adobe needs to have a close look at what is going on and work out a way to stop the unsavoury types from using their product for malicious purposes, otherwise we will be playing whack-a-mole with the bad guys for a very long time to come and more and more visitors to web sites are going to block all advertisements for security reasons, not just because they don't like ads. This will, of course, have a negative flow-on effect on advertising revenues for web sites, not to mention the bad blood that will develop between web sites and advertising networks.
Update: more info on the McAfee blog and the Trend blog.
Oh, and in answer to the question "does the security update for Flash stop this from happening" ... the answer is NO.