Hi there

I am pretty new to the level of hosting service at Lunarpages and know very little about server side stuff, though I am learning pretty fast lol.
My question/s are rather simple really. A mod for the lunarpages phpbb that a friend wants me to install requires that certain folder/s permissions are set to 777. The mod is to allow files to be uploaded as attachments to forum messages (the mod is File Attachment Mod v2).
I have read elsewhere in the forums that this should be avoided if possible.
Is this a security risk?
If so how big a risk does it pose?