The flaw in IE 8 can be exploited to introduce XSS, or cross-site scripting, errors on webpages that are otherwise safe, according to two Register sources, who discussed the bug on the condition they not be identified. Microsoft was notified of the vulnerability a few months ago, they said.
Ironically, the flaw resides in a protection added by Microsoft developers to IE 8 that's designed to prevent XSS attacks against sites. The feature works by rewriting vulnerable pages using a technique known as output encoding so that harmful characters and values are replaced with safer ones. A Google spokesman confirmed there is a "significant flaw" in the IE 8 feature but declined to provide specifics.
Full report here.