On jailbroken iPhones, SSH is installable with a package from Cydia that allows you to connect to your phone and make changes to the filesystem. It does this by logging into the root user with the password "alpine." After installing SSH, it is always recommended that you change "alpine" to the password of your choosing. This hack can only affect people who chose not to change that password -- no one else.
This hack originated in Australia, the home country of ikee, and has possibly spread to other iPhones in other countries, but we've been unable to verify that. A gentleman by the name of JD held an interview with the hacker over IRC and posted it to his blog. In ikee's own words, here's how the worm has spread:
Basically, once your phone is infected, the worm starts looking for other iPhones on the cellular network that use the root:alpine combination. Once it finds another vulnerable iPhone, it installs itself and begins the process again... and again... and again....The code itself is set to firstly scan the 3G IP range the phone is on, then Optus/Vodafone/Telstra's IP Ranges (I think the reason Optus got hit so hard is because the other 2 are NAT'd) then a random 20 IP ranges. I'm guessing a few phones hit a range that another vulnerable phone was on.
Luckily for the jailbreakers in the audience who may have been affected, there's really no harm done -- at least not with this version of the worm. According to the hacker, this was more of an experiment than anything else. The worm changes your background and then disables inbound SSH, which is a good thing. If SSH was left turned on, a similar worm could follow along but conceivably do much more damage. For instructions on how to delete this worm, read JD's interview with ikee. I would recommend reading the interview just for the information it presents; I found it pretty interesting. If you've got a jailbroken iPhone or iPod touch and you've never changed the default device password, now's the time. Here's how, if you are using terminal:
Type: ssh root@(iPhone IP address)
When prompted for the password type: alpine
Now you're connected the phone...
It should then prompt your for a new password -- type one that you'll remember. There's no easy way to reset it if you forget it.
That's it. Please remember to be responsibly secure with your devices. Hackers like ikee are troublesome, but this could have been much worse. While I don't personally condone his actions, he's prevented a lot of people from being vulnerable to more malicious attacks later down the road.