MITRE has reported that XSS vulnerabilities are now the most frequently reported class of vulnerability. More recently, sites such as XSSed.com have begun to collect and publish tens of thousands of Type-1 XSS vulnerabilities present in sites across the web. The XSS Filter which will be part of IE 8 is a great step in the right direction.

This does not claim to be a fix all for all XSS attacks but definitely prevent most common ones. Read more ...

http://blogs.msdn.com/ie/archive/2008/07/02/ie8-security-part-iv-the-xss-filter.aspx

VJ