It appears that your site was hacked by someone who was able to log in using your FTP credentials. Fortunately, this is not a problem with Server Security. We are not 100% as to how they were able to obtain your login credentials, however we do believe it was due to an exploit called Gumblar, which uses a vulnerability in Adobe software products like Acrobat Reader or Flash Player to capture your FTP information and send it out on the internet.

Here is some information about his vulnerability and how to fix it:
It's called Gumblar Virus:
(http://en.wikipedia.org/wiki/Gumblar)
We've seen .htaccess (hidden) files seems to be infected with lines of code that redirect your viewers to a hackers site. You will want to look over these files and replace them if necessary.

Before logging in again, it is recommended that you:

1. Make sure you're running up-to-date antivirus on your computer.
2. Make sure you're running Adobe Reader 9.2 or higher.
3. Make sure you're running Adobe Flash 10 or higher.
4. Disable Javascript in your copy of Adobe Reader.

(To disable Javascript in Adobe Reader, go to Edit => Preferences => Javascript and disable the checkbox that says "Enable Acrobat Javascript.")

Please scan your computer for any malware or viruses (Windows Only).
An excellent free antivirus is AVG (http://free.avg.com)
And a good anti-malware program is Malware Bytes (http://www.malwarebytes.org)

There is also a program called Secunia Personal Software Inspector that will inform you of any vulnerable Software on your computer and provide you with links to download the newest versions (Windows Only): http://secunia.com/vulnerability_scanning/personal/

On a mac, you don't have to worry about having the virus/malware version of this issue. However, you'll still need to update everything you use.