Paul,
One of the biggest exploits is overflows or overruns.
"http://en.wikipedia.org/wiki/Buffer_overflow"
Is a real good article and the section entitled Heap Overflow:
"Microsoft's GDI+ vulnerability in handling JPEGs is an example of the
danger a heap overflow can present"
Blake

I thought that was fixed in C years ago.
Assembly language programmers do that manually.

BTW one way to prevent an embedded virus from executing in a jpg
is to scale the jpg. Scaling subtracts every other byte so any
embedded virus program would be damaged to the point it would no
longer run. The other trick is changing the "quality".

When a jpg comes out of a camera the "quality" is usually
100% and the file can be one meg or larger. Changing the "quality"
to 30% makes no noticeable difference in what you see however
the files size can be reduced to as little as 100K or less. This
has the same positive effect on the virus as scaling.

This is something I routinely do to large jpegs sent to me
for the simple reason it cuts down on the storage space
required and I can send more photos attached to messages.

The free Linux program gimp can do this. Perhaps it takes photo shop
to do it in Windows.

Paul Lamar