According to the Computerworld story it is an Android kernel module that needs to be installed by someone who already has privileged (root) access to the phone's operating system.
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The story by Robert McMillan also says:
"Security researchers will demonstrate a malicious "rootkit" program they've written for Google's Android phone next month at the Defcon hacking conference in Las Vegas."
He doesn't give any evidence that it is malicious. Since the developers will be presenting it at a technical conference on security, it would seem unlikely that it is malicious.
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