Because the user data that is copied into the response is submitted within a request header, the application's behaviour is not trivial to exploit in an attack against another user. In the past, methods have existed of using client-side technologies such as Flash to cause another user to make a request containing an arbitrary HTTP header. If you can use such a technique, you can probably leverage it to exploit the XSS flaw. This limitation partially mitigates the impact of the vulnerability.
Echoing user-controllable data within a script context is inherently dangerous and can make XSS attacks difficult to prevent. If at all possible, the application should avoid echoing user data within this context.
The attacker-supplied code can perform a wide variety of actions, such as stealing the victim's session token or login credentials, performing arbitrary actions on the victim's behalf, and logging their keystrokes.
Users can be induced to issue the attacker's crafted request in various ways. For example, the attacker can send a victim a link containing a malicious URL in an email or instant message. They can submit the link to popular web sites that allow content authoring, for example in blog comments. And they can create an innocuous looking web site which causes anyone viewing it to make arbitrary cross-domain requests to the vulnerable application (using either the GET or the POST method).
The security impact of cross-site scripting vulnerabilities is dependent upon the nature of the vulnerable application, the kinds of data and functionality which it contains, and the other applications which belong to the same domain and organisation. If the application is used only to display non-sensitive public content, with no authentication or access control functionality, then a cross-site scripting flaw may be considered low risk. However, if the same application resides on a domain which can access cookies for other more security-critical applications, then the vulnerability could be used to attack those other applications, and so may be considered high risk. Similarly, if the organisation which owns the application is a likely target for phishing attacks, then the vulnerability could be leveraged to lend credibility to such attacks, by injecting Trojan functionality into the vulnerable application, and exploiting users' trust in the organisation in order to capture credentials for other applications which it owns. In many kinds of application, such as those providing online banking functionality, cross-site scripting should always be considered high risk.
In most situations where user-controllable data is copied into application responses, cross-site scripting attacks can be prevented using two layers of defences:
Input should be validated as strictly as possible on arrival, given the kind of content which it is expected to contain. For example, personal names should consist of alphabetical and a small range of typographical characters, and be relatively short; a year of birth should consist of exactly four numerals; email addresses should match a well-defined regular expression. Input which fails the validation should be rejected, not sanitised.
User input should be HTML-encoded at any point where it is copied into application responses. All HTML metacharacters, including < > " ' and =, should be replaced with the corresponding HTML entities (< > etc).
In cases where the application's functionality allows users to author content using a restricted subset of HTML tags and attributes (for example, blog comments which allow limited formatting and linking), it is necessary to parse the supplied HTML to validate that it does not use any dangerous syntax; this is a non-trivial task.
When an application includes a script from an external domain, this script is executed by the browser within the security context of the invoking application. The script can therefore do anything that the application's own scripts can do, such as accessing application data and performing actions within the context of the current user.
If you include a script from an external domain, then you are trusting that domain with the data and functionality of your application, and you are trusting the domain's own security to prevent an attacker from modifying the script to perform malicious actions within your application.
Scripts should not be included from untrusted domains. If you have a requirement which a third-party script appears to fulfil, then you should ideally copy the contents of that script onto your own domain and include it from there. If that is not possible (e.g. for licensing reasons) then you should consider reimplementing the script's functionality within your own code.