Protection against international domain names
You could almost consider this security feature as an extension of the phishing filter except that it is automatically enabled and is used whether the phishing filter is in use or not. The idea is that oftentimes malicious Web sites try to impersonate well-known legitimate Web sites. One of the hardest things for a malicious Web site to impersonate is the legitimate site's URL. Less sophisticated perpetrators often rely on close misspellings of the legitimate site's URL. More sophisticated scam artists have begun using foreign language character sets in the URL. The idea is that some foreign language character sets use characters that are visually identical to characters used in the English alphabet, but they are not treated the same by the computer. This allows for the creation of a URL that looks identical to a legitimate URL.
To protect against this technique, Internet Explorer now notifies you when a URL contains a mix of character sets, since that often indicates that the site is malicious or misleading. Again, you don't have to do anything to enable this feature; it is enabled automatically.
URL handling
A feature that is similar to the foreign language filter is a new URL parser. In the past, attackers have embedded remote code execution commands in the URL. There are several different variations on this technique, but the most popular technique was one that included a command with an extremely long URL. The idea was that the URL's excessive length would cause a buffer overflow. If a command was positioned at just the right position within the URL, then the command could execute when the buffer overflow occurred.
That particular exploit was fixed long ago, but there are countless varieties of the technique that are still used today. IE7 contains a new URL parser that Microsoft designed to perform a sort of integrity check on URLs prior to unleashing them up on Internet Explorer.
The new URL parser is another example of a security feature that is enabled by default and is not configurable.

Configuring IE7 security on Windows Vista

Introduction
General security configuration
The Phishing filter
International domain names, URL handling
ActiveX, Information bar, cross-domain protection
Security features on the Windows Vista version of IE7
About the author
Brien M. Posey, MCSE, is a Microsoft Most Valuable Professional for his work with Windows 2000 Server and IIS. Brien has served as the CIO for a nationwide chain of hospitals and was once in charge of IT security for Fort Knox. As a freelance technical writer he has written for Microsoft, TechTarget, CNET, ZDNet, MSD2D, Relevant Technologies and other technology companies.
This tip originally appeared on SearchWindowsSecurity.com.