The attack itself is simple: a malicious user who makes a request to http://example.com/file.ext%00.php causes file.ext to be parsed as PHP.
If an attacker can control the contents of a file served up by nginx (ie: using an avatar upload form) the result is arbitrary code execution. This vulnerability can not be mitigated by nginx configuration settings like try_files or PHP configuration settings like cgi.fix_pathinfo: the only defense is to upgrade to a newer version of nginx or to explicitly block potentially malicious requests to directories containing user-controlled content.
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