Various browser vulnerabilities [can] automatically download and run -- i.e. unknowingly to the visitor -- [a malware] binary upon visiting a website ... The potential victim base from these so-called drive-by downloads can be far greater than other forms of exploitation because traditional defenses (e.g. firewalls, dynamic addressing, proxies) pose no barriers to infection.The paper goes on to describe the honeypot they used to detect malware, some of the properties of the malware, more detail and examples on the malware distribution networks and how they obscure the malicious final landing site, and how antivirus products fail to detect much of the malware.
Malware serving networks are composed of tree-like structures ... [that] deliver the malware to the victim after a number of indirection steps ... to lure users .... Our results reveal that ad serving networks are increasingly being used as hops in the malware distribution chain.
About 0.6% of the top million URLs that appeared most frequently in Google's search results led to exposure to malicious activity at some point.
In a set of 2,000 well known advertising networks ... 2% of the landing sites were delivering malware via advertisements ... [often with] more than 6 redirection steps.
1.3% of the incoming search queries to Google's search engine return at least one link to a malicious site [either in the results or in an ad].
Please see also "Ghost turns Zombie: Exploring the Life Cycle of Web-based Malware" (PDF), a fascinating USENIX 2008 paper by some of the same authors that details the "post-infection network behavior of web-based malware". Some of the botnets "demonstrated surprising sophistication" including sending "memory dumps of failed installations" back to the malware developers.
Please see also Niels Provos' post on the Official Google Security Blog and a post by Bruce Schneier, both on the first paper.