The hackings have gotten very mean... not only does he steal/give away/delete credits and items, he also destroys what he can, using all reset points and pumping IP to skills that are useless. He also disbanded an org when he hacked org president.. That's just sick..
AO tools really shouldn't have
any business connecting anywhere in the internet except for AORC (obviously) so if your firewall asks for a permission to allow the connection, it's better to block it. Not 100% sure method since some viruses can propably sneak past some firewalls one way or another.
Autoupdate features may be nice and easy for users but they also bring a security risk when people learn to trust them too much and allow everything.
To improve your safety:
Get rid of Internet explorer and use Firefox or Opera (disable javascript and Java unless you really need them)
Use proper firewall and antivirus tools + spyware removal tools. There are plenty of good and free ones out there!
Get your 3rd party programs only from trusted sites and if the program doesn't need internet access block it always if your firewall asks.
Do not open suspicious URLs that somebody you don't know in AO gives you one to "check" something. Especially if it ends with ".exe"
Use strong password that doesn't really mean anything, has high and low case letters and numbers mixed. In worst cases hacker can guess the password..
Don't make toons in game that have same name as your account name. If hacker doesn't know it, he can't log in with it. If you already have a toon with same name as your account then at least be quiet about it
Use different passwords to different places. Even strong password doesn't do you any good if you leave it to every site you use.
Don't share your account! Even if you have good security, your friend might not.
Of course you all know it already but some people are still too lazy to actually do all those things. Be safe!