Microsoft Internet Explorer comes with Java virtual machine and accompanying class packages. Multiple security vulnerabilities have been found in the Java environment. Some of these allow an attacker to deliver and run arbitrary code on the Internet Explorer or Outlook user's system when a hostile web site or mail message is viewed.
The latest versions of the software are affected by the flaws, but Outlook (Express) users aren't vulnerable to the mail-based attack if the security zone of mail is set to Restricted. This is the default case with Outlook Express 6 and Outlook with the latest security updates. In this case Java Applets aren't shown at all in mail messages; if Applets are shown, then the user is vulnerable.
Java Applets are small Java programs that can be embedded inside HTML documents. Applets are generally secure because the Java environment enforces strict security policies for them. Applets are enabled by default in most web browsers today.
As opposed to normal executable programs, Java Applets don't contain machine language code but special "bytecode" which is interpreted by the Java virtual machine, a kind of simulated processor. Bytecode doesn't have direct means of controlling the processor or operating system's resources.
Java applications in general can do file or network operations just like any program. Applets are treated differently; because Applets contain untrusted code supplied by web sites (or anyone sending you mail), they are run within a strictly bound "sandbox". They can't access local files and their allowed network operations are very limited. When the Java environment is implemented correctly, untrusted Applets can't do anything dangerous. The flaws discussed here aren't related to the Java or Applet concepts, but individual implementations of them.
There were more than ten (10) different Java vulnerabilities found and reported to Microsoft. Some of these allow file access on the viewer's system, some allow access to other resources, and some allow delivery and execution of arbitrary program code on the victim system. These attacks can be carried out when a web page or mail message containing a hostile Applet is viewed with Internet Explorer or Outlook. In this case the Applet may upload any program code and start it. The code can do any operations the user can do - read or modify files, install or remove programs, etc.
The vulnerabilities are mostly related to native methods and their improper or missing parameter checking. There are also some logical mistakes and some problems in package, field, or method visibility (ie. public/protected/private). Some of the vulnerabilities deal with system dependant memory addresses, which makes exploiting them more difficult; some of the more serious ones don't require such information.
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