Inetutils is a collection of common network programs including a telnet client and server.
The telnetd server invokes /usr/bin/login (normally running as root) passing the value of the USER environment variable received from the client as the last parameter. If the client supply a carefully crafted USER environment value being the string "-f root", and passes the telnet(1) -a or --login parameter to send this USER environment to the server, the client will be automatically logged in as root bypassing normal authentication processes. This happens because the telnetd server do not sanitize the USER environment variable before passing it on to login(1), and login(1) uses the -f parameter to by-pass normal authentication.
An attacker can login as root via the telnetd daemon.
Reinstall inetutils with the telnetd USE flag disabled. This is the default in Gentoo.
All inetutils users with the telnetd USE flag enabled should upgrade to the latest version:
# emerge --sync
# emerge --ask --oneshot --verbose ">=net-misc/inetutils-2.7"