What happens is your handset stores a token known as authToken on your handset after authenticating a service such as Facebook or Twitter. The token is stored for 14 days, allowing users to re-access the service easily. But it is this authToken that can be easily exploited using a bit of old-fashioned deception. A data thief need only to set up an innocent looking, unencrypted wireless network, give it a name that would encourage you to connect and feel safe on said network (such as starbucks, attwifi, etc.), and then snatch up the authTokens attempting to connect to services over the network. Whoever has these authTokens can then gain access to your various accounts.
While Google has, as mentioned earlier, patched the exploit in the latest versions of Android, they have yet to respond to the report that Android versions 2.3.3 and earlier remain vulnerable. Your best bet for now is to set your phone to only manually connect to wireless networks, take a few precautions, and you should be fine.
[via BGR]