From CryptoDox, The Online Encyclopedia on Cryptography and Information Security
E-mail spoofing is a term used to describe fraudulent email activity in which the sender address and other parts of the email header are altered to appear as though the email originated from a different source. E-mail spoofing is a technique commonly used for spam e-mail and phishing to hide the origin of an e-mail message. By changing certain properties of the e-mail, such as the From, Return-Path and Reply-To fields (which can be found in the message header), ill-intentioned users can make the e-mail appear to be from someone other than the actual sender. It is often associated with website spoofing which mimic an actual, well-known website but are run by another party either with fraudulent intentions or as a means of criticism of the organization's activities.
As many spammers now use special software to create random sender addresses, even if the user finds the origin of the e-mail it is unlikely that the e-mail address will be active.
The technique is now used ubiquitously by mass-mailing worms as a means of concealing the origin of the propagation. On infection, worms such as ILOVEYOU, Klez and Sober will often try to perform searches for e-mail addresses within the address book of a mail client, and use those addresses in the From field of e-mails that they send, so that these e-mails appear to have been sent by the third party. For example:
This can be particularly problematic in a corporate setting, where e-mail is sent to organisations with content filtering gateways in place. These gateways are often configured with default rules that send reply notices for messages that get blocked, so the example is often followed by:
Newer variants of these worms have built on this technique by randomising all or part of the e-mail address. A worm can employ various methods to achieve this, including: