At first, we thought the XML exploits targeting the flaws discussed in Microsoft Security Advisory 961051 affected only Internet Explorer 7. However, many more versions of IE are affected, and exploits are moving in the wild.Here's the scoop, straight from Microsoft, updated as of yesterday:

Microsoft is continuing its investigation of public reports of attacks against a new vulnerability in Internet Explorer. Our investigation so far has shown that these attacks are only against Windows Internet Explorer 7 on supported editions of Windows XP Service Pack 2, Windows XP Service Pack 3, Windows Server 2003 Service Pack 1, Windows Server 2003 Service Pack 2, Windows Vista, Windows Vista Service Pack 1, and Windows Server 2008. Microsoft Internet Explorer 5.01 Service Pack 4, Microsoft Internet Explorer 6 Service Pack 1, Microsoft Internet Explorer 6, and Windows Internet Explorer 8 Beta 2 on all supported versions of Microsoft Windows are potentially vulnerable.

Here's what the Microsoft Malware Protection Center has to say about attack trends:

The exploit sites we've seen so far drop a wide variety of malware -- most commonly password stealers like new variants of game password stealers like Win32/OnLineGames, and Win32/Lolyda; keyloggers like Win32/Lmir; Trojan horse applications like Win32/Helpud along with some previously unseen malware which we generically detect as Win32/SystemHijack. We fully expect the variety of malware being dropped by this exploit to broaden as the exploit code starts to circulate around the Internet underground.

This issue could impact you even if you avoid surfing questionable sites. Over the past few months, we've seen a surge in SQL injection attacks which enable miscreants to inject content onto trusted sites (we even blogged about the technique a few months ago). This class of attack, along with other more classical forms of website intrusion mean that even trusted sites can end up serving malicious content, causing you to get infected. For this reason, we cannot stress enough the importance of keeping your anti-malware definitions up to date as well as following the guidance on the "Protect Your PC" page, as well as the security advisory on this issue and the MSRC blog post.

The fact that this vulnerability affects so many versions of IE, and that you can be infected just by visiting any trusted Web site means you should take whatever precautions you can to protect yourself. Microsoft does provide some workarounds in this advisory, under Suggested Actions and Workarounds.

The less initiated may just want to download and run Firefox, at least until Microsoft is able to resolve this vulnerability.