Why crossdomain.xml is a good thing
I regularly encounter Flash users as well as clients that wonder why the Flash player implements a cross-domain sandbox security model using policy files named crossdomain.xml. I drew 6 simple diagrams that demonstrate its use.
As you can see in the slides below, a malicious user could steal data from your LAN. This is made possible by the fact that every SWF file you view runs locally on your machine. This means that a SWF would have HTTP access to all machines behind the company firewall. Not a good thing.
To prevent this, every server other than the one the SWF is loaded from, needs to have a crossdomain.xml file available, listing all domains that have access to that particular server. If the crossdomain.xml file is either absent or does not list the domain the SWF originates from, the SWF won’t have access to that server.
[kml_flashembed movie="/download/about_cd.swf" width="450" height="580" /]
The crossdomain.xml file prevents SWFS from snooping around on the LAN. And it not only works for servers within your LAN, but also for other servers on the Internet. For example, if you want to play around with the Flickr API, you first need to register with them, so they will add your domain to the Flickr.com crossdomain.xml file. This way, Flickr can easily control access to their API.
Please note that, at best, I’ve only scratched the surface of the whole policy file system. For more information, please check these helpful pages at Macromedia website.

September 4th, 2007 at 17:33
[...] http://kb.adobe.com/selfservice/viewContent.do?externalId=tn_14213&sliceId=1 http://www.martijndevisser.com/blog/2005/why-crossdomainxml-is-a-good-thing/ [...]
October 17th, 2007 at 9:32
[...] Resources: Using cross-domain policy files Overview of permission controls Cross-domain policy file usage recommendations for Flash Player Allowing cross-domain data loading About compatibility with previous Flash Player security models cross domain policy files (moock.org) Why crossdomain.xml is a good thing [...]