Since there have been a LOT of emails asking for more details on the main page post about it, I'll elaborate here and trim down the size of the main page one some, with a link to this.
The basic problem is that asia 1-3 and uswest/east/europe are linked, in 2 separate clusters of 3 servers each. Last year, (well, late 2000 actually) there was a suddenly-very popular bug found that enabled you to make a char of the same name on a different realm, and trick bnet into changing realms, which would let you log onto your character "Lancelot" on say europe, but select uswest or east and log onto the lvl 90+ Lancelot on that realm, instead of your lvl 1 newbie on europe. You could then take all of their items, or even get them killed if they were hardcore. Hackers were able to stay logged on for as long as they liked, and really annoying ones were impersonating people, trying to pk their friends, etc.
This got extremely bad, with most of the top 50 hc ladder chars dead, and the ones who weren't had made protecting names on the other realms, or else stayed logged on for 3 or 4 days straight. Blizzard had to do a rollback once they fixed it, and anyone who wanted to could select a character to be rolled back to where they were at a previous date. I don't remember all of the details, but you could look in our news archives at Jan 2001 or Dec 2000 and read all about it.
This problem has returned, but it's much harder to do it now. The hackers must make a char of the same name, on a different realm, and then with tricky packet flooding stuff and other sneaky things I'm not going to relate in detail (for obvious reasons) they can log off and back on, as the char of a same name on a different realm. This only lasts about one minute now, so they have to loot very quickly, and can't get on playing and impersonate you and try to pk your friends or anything, unless they work very quickly. Of course they could get the same character twice, if they wanted to.
Character being targeted are of course the high level ones, visible on the ladder. Other well-known characters might be targets as well, for revenge possibly.
To protect your character you can mule all of their equipment, softcore at least. I wouldn't leave any unused skill or stat points either, some idiot might get on as you and put them into energy or Grim Ward or something.
The best protection though is to have chars of the same name on the other linked realms. If your main char is lvl 99 on europe and named Yummy-Haggis then you should make chars named Yummy-Haggis on useast and west. You'll be safe then (I did this last night for my 98 HC javazon).
The other protection advice relies on how the hacking trick works, which requires the hacker to have an identical item, apparently in the same spot on their char, as you do. The hack can be configured to work on any item in the game, but these are rather long numbers you have to put into the packet sending program, and few people know many of them. The script kiddies who are using this are using it configured to send the packet code that = Super Healing Potion, since most characters will have one, and usually in their belt. So a protection is to not have any of those in your belt, or possibly anywhere. However since they can send a packet that matches any item in the game, they can also do this with other potions, scrolls, tomes, charms, anything. THey'd just need to have the identical item on their character. I don't know how far this goes, if they knew you wore chance guards could they do it with any chance guards, or would they have to be identical (duped probably) or just the same %? I'd think duped, same item number code in the game, so that's pretty unlikely, unless you are using some very common duped weapon, windforce or something.
Also if your character is logged on they'll get an error trying to log on as you, so you are safe if you have that character on (not just the account, the actual character).
This hack doesn't endanger any other chars on your account, since it's not account theft, it's just a trick to log on as a known character name. So mules are generally safe. Problem is if you know people on bnet and they know the name of some of your mules, they could try this to get at them, and your lvl 1 amulets mule might have more of value than your lvl 99 sorceress... This will probably begin to happen if this hack grows in popularity and lasts for a while (bliz doesn't fix it fast) as all of the lvl 99's get hit or protected, and hackers look for other targets.
Numerous emailers have asked if bliz will do a rollback for their stripped lvl 99's, and we have no info about this. Bliz did rollback offer the last time this happened, but that was because it became a huge problem, with hundreds of characters hit. It's more limited in scope this time, at least thus far, and Bliz does post their policy of "no character resets ever, for any reason" pretty obviously. You are always playing at your own risk, chars on their server are sort of stored by bliz as a favor (we aren't paying montly for storage and tech support, like an MMORPG) so they don't guarantee their safety or accessibility.
It's possible, you can always mail your char and account name to support@blizzard.com and say when they were stripped, and when they were last pre-stripped, and if they hear from lots of people they might do something. They obviously won't take any restoring action until the exploit is totally fixed, so I wouldn't expect it soon, if at all. Bliz hasn't made any public comment about this yet.
Hopefully this covers the topic thorougly enough, but if you have other questions or comments you can post them here.