Ok so what is a Local Shared Object (LSO)
The easiest way to explain it is to think of it as a Flash cookie. A website can use it to store information on a users computer such as a games highscore or information they have filled in (name, age, etc) [Read More here]
Unlike a cookie however you can not disable them through your normal browser settings. Why does this pose a security risk? Well much like a cookie these files could be used by a company to track your movments across multiple domains. This means that even if you have disabled cookies on your machine a company could still be storing (and retrieving) information from your machine without your knowledge.
This information could be anything from your IP address to what adverts you have clicked on.
As you can imagine this information could prove very valuable to an advertising company - allowing them to learn from what you ahve already done and target you with adverts which are likly to attract you more.
So how do you disable it?
Macromedia has a tool on their site for tweaking your flash players settings [find it here]
Ok so load up the page under the global settings for pages you havn't visited yet set the amount of allowed storrage pace to none and tick the box 'Never ask again' so that it doesn;t ask you next time a page wishes to write any information to your HD
Now do the same for websites you ahve already visited (you may want to have a look through the sites and see just how many have already stored information on your PC.
thats it you should now be blocking all attempts by webmasters to use LSO's to store information on your machine.