Failure to enable validation when parsing XML gives an attacker the opportunity to supply malicious input.
Most successful attacks begin with a violation of the programmer's assumptions. By accepting an XML document without validating it against a DTD or XML schema, the programmer leaves a door open for attackers to provide unexpected, unreasonable, or malicious input. It is not possible for an XML parser to validate all aspects of a document's content; a parser cannot understand the complete semantics of the data. However, a parser can do a complete and thorough job of checking the document's structure and therefore guarantee to the code that processes the document that the content is well-formed.
[1] Standards Mapping - OWASP Top 10 2010 - (OWASP 2010) A1 Injection
[2] Standards Mapping - OWASP Top 10 2004 - (OWASP 2004) A1 Unvalidated Input
[3] Standards Mapping - OWASP Top 10 2007 - (OWASP 2007) A2 Injection Flaws
[4] Standards Mapping - Security Technical Implementation Guide Version 3 - (STIG 3) APP3510 CAT I
[5] Standards Mapping - Common Weakness Enumeration - (CWE) CWE ID 112
[6] Standards Mapping - Payment Card Industry Data Security Standard Version 1.2 - (PCI 1.2) Requirement 6.3.1.1, Requirement 6.5.2
[7] Standards Mapping - Payment Card Industry Data Security Standard Version 2.0 - (PCI 2.0) Requirement 6.5.1
[8] Standards Mapping - Payment Card Industry Data Security Standard Version 1.1 - (PCI 1.1) Requirement 6.5.1, Requirement 6.5.6
[9] Standards Mapping - FIPS200 - (FISMA) SI
[10] XmlReader Class Microsoft
[11] XmlReaderSettings Class Microsoft