Free permissions for directory / files: traps, security issues?

My question is more theoretical than practical, but I think you can answer it :)

What are the main (security) issues when shared folders / files have permissions, such as 777? How can someone take advantage of a poorly configured file permission? Can anyone use this weakness via http, for example?

Is it a bad practice to create a writable folder for both httpd and ftp?

Thanks in advance Fabrik