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Flashback was a serious attempt to cause damage to Macs with Adobe Flash & Oracle's Java on April 7, 2012.
Additionally, it was recently found that Java 7 has some known security holes which should be avoided. To check which Java version you are running, see this link. Java 6 release 35 and Java 7 release 7 are both verified to not have the zero day vulnerability. Java 6 release 35 for Mac OS X 10.6, and Java 6 release 35 for 10.7. Java 7 release 7 is needed for 10.7.3 to avoid the most recent issues with Java.
Adobe has posted this link to check your Flash version.
Apple has posted a knowledgebase article about the Flashback malware. Links below to the removal tools should only be applied after backing up. Please read the entire article to determine what is needed first before jumping into the fray.
For 10.7.3 users who do not have Java installed, Apple has now released a Flashback removal tool.
For 10.6.8 users there is this patch.
For 10.5.8 Intel Users, May 14, 2012, Apple released this patch and removal tool. From what is known PowerPC users generally are unlikely to be affected, but this may change in the future, though Apple has yet to come out with a definitive statement. Post to http://www.apple.com/feedback if you believe there should be a statement.
For PowerPC, 10.6.0 to 10.6.7, 10.7 to 10.7.2, 10.5.7 and earlier, disabling Java is probably the best action you can take to avoid being impacted. Furthermore,
ignore any requests to update Adobe software from non-Adobe websites, or Java from non-Oracle or Sun websites, or Apple's Software Update.
If you appear to have been infected, and have a machine that supports 10.5.8 (Intel Macs older than August 28, 2009), 10.6.8 or 10.7.3 backup to a new place before installing any software, so you can see if you can apply the 10.5.8, 10.6.8, or 10.7.3 update if needed, and the patch it with Apple's patch to Java that corrects the hole in Java. You may need to watch your financial data to ensure no one has hacked that or stolen your identity more carefully. Several places on the net offer infection tests. Some are more reliable than others, and I would ask in the forum to ensure you get the most reliable.
People with slow internet connections who need to update to the appropriate version of 10.5, 10.6 and 10.7, should take the appropriate link with them and copy the installer DMG file to a USB flash drive to be updated to the version able to be patched: 10.5.8 Combo, 10.6.8 Combo and 10.7.3 Combo. If interested in updating to 10.7, read this tip.
Until all known varients of the malware have been diagnosed, you are probably better off with Sophos to ensure you catch all known variants.
Downloads Apple posted on April 12th at the same links Apple offered before now offer new capabilities. Only these now include a built-in removal tool of Flashback.
If after using these downloads, you still appear to have the Malware, be sure to post to the forum what you find, and someone will be able to help.