It is only a percieved problem with techniques that might deliberately overload the buffers when a jpeg image is being processed. Unfortunately it could easily become a serious problem while everyone gets a chance to patch their software, because anti-virus and firewall software aren't (yet) designed to protect you against it. It will become a race between the hackers and microsoft/net security community!
So what to do?
If you use an apple mac or already have service pack 2 of XP, (ie you bought your computer just recently), you are probably fine. If however you are like most of us and you have a PC with any earlier operating system be careful about downloading and processing images on your computer, with standard XP and Ofiice tools, in fact don't unless you really have too. However don't hurry out and upgrade to service pack 2, it will probably cause more problems than it solves.
This is the official microsoft security bulletin. It list all the modules that must be patched.
UPDATE: The internet Tourbus has been around for a while and I subscibe to there email newsletter, the are tracking the issues with patching XP and jpeg vunerability in their normal thorough but fun way. So for an update take a ride on the bus.