I wrote this a short while ago for a mailing list, and I think it does a pretty decent job of putting some cross-domain policy concepts into perspective, covering why these files are necessary and touching on why server-based proxies work as a way to get around them. The original question revolved around the inability to use BitmapData.draw() despite the fact that the image could be loaded and displayed in the SWF. My reply was as follows:

Alan just posted an interview of me on Fireworks Designer. It focuses in large on my Burnout Paradise™ Paradise City Interactive Locations Map and how Fireworks was used to make it possible.Turns out I haven't touched the map in what seems to be exactly a year, which is sad because I just noticed a bug where map graphics defined within query variables were getting cleared out after the map graphics loaded. I quickly found the source to fix it only to notice I had a lot more planned for the project, including a race editor as well as other tools for users to define their own maps! Seems I never got around to hooking them up, and sadly probably never will.

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