Here’s the short version: You jailbreak your iPhone and SSH access is opened on it.  If you don’t change your default root password, a hacker can log into your iPhone (or iPod touch) and gain full control very easily.  A Dutch hacker takes this a bit further by throwing up an SMS popup after breaking into unsecured iPhones and asking €5 for instructions on how to secure the iPhone.  We’ll save you €5 — do a restore. 

The long version is at Ars.

If you want to stay clear of this kind of nonsense, change your password after jailbreaking, or obviously, don’t jailbreak.

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