There seems to be a slight flaw in the way DNS works, leaving it vulnerable to cache poisoning. Such attacks aren’t new, but mention the words “Internet” and “hacking” and everyone freaks out.
The attack would let hackers re-direct traffic to whatever nefarious Web site they choose. For example, you type www.cnn.com but instead get re-directed to a site that looks like CNN, but is really just a phishing site. That’s the theoretical worst case scenario, but the odds of that actually happening are pretty small. Any competent sysadmin monitoring traffic should notice the irregular activity, and configure his firewall accordingly.
The fact is, though, that the vulnerability exists, but is being patched as we speak. Microsoft, Cisco and other such companies have been working on a patch for some time.
So yeah, it’s a problem, but not something you should be freaking out over.