What's wrong with having '.' in your $PATH ?

A bit of background: the PATH environment variable is a list of directories separated by colons. When you type a command name without giving an explicit path (e.g. you type "ls", rather than "/bin/ls") your shell searches each directory in the PATH list in order, looking for an executable file by that name, and the shell will run the first matching program it finds.

One of the directories in the PATH list can be the current directory "." . It is also permissible to use an empty directory name in the PATH list to indicate the current directory. Both of these are equivalent

for csh users:

        setenv PATH :/usr/ucb:/bin:/usr/bin
        setenv PATH .:/usr/ucb:/bin:/usr/bin
for sh or ksh users
        PATH=:/usr/ucb:/bin:/usr/bin export PATH
        PATH=.:/usr/ucb:/bin:/usr/bin export PATH
Having "." somewhere in the PATH is convenient - you can type "a.out" instead of "./a.out" to run programs in the current directory. But there's a catch.

Consider what happens in the case where "." is the first entry in the PATH. Suppose your current directory is a publically-writable one, such as "/tmp". If there just happens to be a program named "/tmp/ls" left there by some other user, and you type "ls" (intending, of course, to run the normal "/bin/ls" program), your shell will instead run "./ls", the other user's program. Needless to say, the results of running an unknown program like this might surprise you.

It's slightly better to have "." at the end of the PATH:

        setenv PATH /usr/ucb:/bin:/usr/bin:.
      
Now if you're in /tmp and you type "ls", the shell will search /usr/ucb, /bin and /usr/bin for a program named "ls" before it gets around to looking in ".", and there is less risk of inadvertently running some other user's "ls" program. This isn't 100% secure though - if you're a clumsy typist and some day type "sl -l" instead of "ls -l", you run the risk of running "./sl", if there is one. Some "clever" programmer could anticipate common typing mistakes and leave programs by those names scattered throughout public directories. Beware.

Many seasoned Unix users get by just fine without having "." in the PATH at all:

        setenv PATH /usr/ucb:/bin:/usr/bin
      
If you do this, you'll need to type "./program" instead of "program" to run programs in the current directory, but the increase in security is probably worth it.
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