What happened
Our investigations yesterday (17 Dec 2009) led us to believe that the banner advertising display and click-through code was affected from 2pm to 6:30pm GMT. The Ads server was disabled yesterday late afternoon. Further investigations using anti-virus tools discovered hidden 'malware' in the Ads display code, which was called Trojan.Shell-2. We have removed the infected file from our servers, and are confident that we now have completely clean server systems. We are now waiting for Google to take down its warning. (Updated: this warning was taken down on the 18th of December.)
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