Wildcard certificates are SSL/TLS server certificates that unlike their traditional counterparts bind a entire domain (or sub-domain) to a single private key, for information on the kind of wildcards one can specify see: http://support.microsoft.com/kb/258858.
Why would someone want to have a certificate like this? Well in my experience the decision is most often made on cost factors (acquisition, management, and politics), in other words I would rather buy onecertificate for my entire server farm instead of one for each server.
What makes the use of these certificates a bad idea? Well there are several reasons:
First, SSL/TLS typically provides two key properties; authentication of the server and confidentiality of the session; the core value of that pair is the authentication of the server as you should not even consider submitting data if you don’t know who its going to and if you never submit data you don’t need to worry about if the session is encrypted (most of the time).
Lets explore why we care about “who” were talking to and why that need to specific, certification authorities only issue certificates to entities that agree to something commonly referred to as a subscriber agreement; this agreement obliges the subscriber to have certain practices, the most basic of which might be not to publish the associated private key on the web or to not host malicious content.
With a wildcard certificate you may or may not know if the site content your experiencing agreed to such an agreement, more over you have a pretty high probability that the private key associatedwith the certificate exists in multiple locations, this also increases the likely hood that the private key is in software and not hardware making it a practical possibility a remote exploit could expose the private key to an attacker.
Then there is the question of who your talking to, many sites use sub-domains (for example WordPress), this becoming more and more common with the exhaustion of easy to remember domains and new community sites that what remember-able URLs for their members, each of these “subs-sites” typically have control over their own content and knowing who their hosting provider is doesn’t tell you anything about them in particular.
Now I am not suggesting that having a certificate tells you that the content being served from that host is somehow more trustworthy but knowing who you are talking to went to the trouble to prove who they are to you is useful when making a trust decision.
Secondly there is the practical issue of key management, as I mentioned earlier you know that the key has (very likely) been shared amongst multiple hosts, and keys that have been spread out like the dogs breakfast are much less trustworthy than ones that have never been shared.
If these things are so bad why did they get developed? Well there are a few reasons, certainly cost was one of the but I actually believe it was done in the hope to enable intermediary SSL/TLS accelerators too to service multiple sites; the thing is that these devices have always been able to handle different certificates for each of the hosts they secure so this would have just been a excuse.
In my opinion all browsers should have a setting that allows users to disable the wildcard behavior, in-fact I would go so far to say that this should be the default.
There is another similar case to the wildcard certificate, it is possible to bind multiple identities to a single key pair, one can put in multiple Subject Alternate Names, in other words I can create a certificatethat binds 100 host names into a single certificate; this still has many of the problems of a wildcard certificate and I would argue that this case should also be covered by any setting that disabled ambiguously bound certificates.
Alun Jones has a good blog post from a while ago on this topic that is worth a read too.