The most significant breach of U.S. military computers was caused by a flash drive inserted into a U.S. military laptop on a post in the Middle East in 2008.

Deputy Defense Secretary William J. Lynn III says malicious code placed on the drive by a foreign intelligence agency uploaded itself onto a network run by the U.S. military's Central Command. The code spread undetected on both classified and unclassified systems, establishing what am ounted to a dig ital beachhead, from which data could be transferred to servers under foreign control.

The Pentagon's 15,000 networks and 7 million computing devices are being probed thousands of times daily; that cyberwar is asymmetric; and that traditional Cold War deterrence models of assured retaliation do not apply to cyberspace, where it is difficult to identify the instigator of an attack.

Counterfeit hardware has been detected in systems that the Pentagon has bought. Such hardware could expose the network to manipulation from adversaries.

Infiltrating the military's command and control system is significant, said one former intelligence official who spoke on the condition of anonymity because of the sensitivity of the matter. "This is how we order people to go to war. If you're on the inside, you can change orders. You can say, 'turn left' instead of 'turn right.' You can say 'go up' instead of 'go down.

Ref: http://www.washingtonpost.com/wp-dyn/content/article/2010/08/24/AR2010082406154.html