Bruce Schneier, of Counterpane, sent in the word that a vulnerability has been found in PGP. He attached an explanation below of what's going on, as well as a paper concerning the risks of key escrow.
A very serious PGP vulnerability was just discovered. Using this vulnerability, an attacker can create a modified version of someone's public key that will force a sender to encrypt messages to that person AND to the attacker.
Let me explain.
When Network Associates joined the Key Recovery Alliance, they modified PGP to allow for third-party key recovery. They did this by supporting something called an Additional Decryption Key (ADK). Normally, when a PGP user creates a PGP certificate, it contains a single public key (as well as identifying information as to who the key belongs to). PGP version 5 and 6 allow the user to add additional ADKs to the certificate. When a sender encrypts a message to that user, PGP will automatically encrypt the message in both the user's public key and the ADK. The idea is that the ADK belongs to the secret police, or the user's employer, or some organization, and that organization can intercept the encrypted message and read it.
A stupid idea, but that's the sort of thing that Key Escrow demands.
The flaw is that some version of PGP don't require the ADKs to be in the signed portion of the PGP certificate. What this means is that an organization can take a PGP certificate, append his ADK, and spread it out to the world. This tampered version of the certificate will remain unnoticed by anyone who doesn't manually examine the bytes, and anyone using that tampered version will automatically and invisibly encrypt all messages to the organization as well as the certificate owner.
Unfortunately, the problem won't go away until all vulnerable versions of PGP are eradicated: the sender who is responsible for encrypting to the ADKs, not the recipient.
Way back in 1998 a bunch of us cryptographers predicted that adding Key Escrow would make system design harder, and would result in even more security problems. This is an example of that prediction coming true.