libxml2, possibly before 2.5.0, does not properly detect recursion during entity expansion, which allows context-dependent attackers to cause a denial of service (memory and CPU consumption) via a crafted XML document containing a large number of nested entity references, aka the "billion laughs attack."
http://www.reddit.com/r/programming/comments/65843/time_to_upgrade_libxml2
http://mail.gnome.org/archives/xml/2008-August/msg00034.html