Normally the only time you have something with 777 attributes is when you have a directory you want anyone to be able to upload to. On my server I have it to where you can upload pictures and songs with a php script. And it won't work unless the permissions are 777 on the directory, and by that I mean rwxrwxrwx. So yes it is a risk, so only do it if you want a user to be able to upload or change something with some sort of script. If you do have uploads, make sure to limit what type of files can be uploaded so that you don't get any nasties.