actually as a side note, i have seen many web hosting companies have the following setup:
/home/* is there user directories
all these are allowed by anyone who has an account on the system to cd into the /home/user1 for example, but not able to execute a command such as 'ls'. however, here is the clencher: their public_html, or www directory is chmod'd to the point where you can view any file in there (ie cat database_connect.php for their password information, which 99% of the time is their real passwd)
just a precaution.. you should try it on your system to make sure ;o) just go into /home and type ls, pick a user dir, if you can cd in there then you have internal security issues ;o)