How PGP works
PGP encryption uses public-key cryptography and includes a system which binds the public keys to a user name and/or an e-mail address. The first version of this system was generally known as a web of trust to contrast with the X.509 system which uses a hierarchical approach based on certificate authority and which was added to PGP implementations later. Current versions of PGP encryption include both alternatives through an automated key management server.
PGP supports message authentication and integrity checking. The latter is used to detect whether a message has been altered since it was completed (the message integrity property), and the former to determine whether it was actually sent by the person/entity claimed to be the sender (a digital signature). In PGP, these are used by default in conjunction with encryption, but can be applied to plaintext as well. The sender uses PGP to create a digital signature for the message with either the RSA or DSA signature algorithms. To do so, PGP computes a hash (also called a message digest) from the plaintext, and then creates the digital signature from that hash using the sender's private keys.
Both when encrypting messages and when verifying signatures, it is critical that the public key one uses to send messages to someone or some entity actually does 'belong' to the intended recipient. Simply downloading a public key from somewhere is not overwhelming assurance of that association; deliberate (or accidental) spoofing is possible. PGP has, from its first versions, always included provisions for distributing a user's public keys in an 'identity certificate' which is so constructed cryptographically that any tampering (or accidental garble) is readily detectable. But merely making a certificate which is impossible to modify without being detected effectively is also insufficient. It can prevent corruption only after the certificate has been created, not before. Users must also ensure by some means that the public key in a certificate actually does belong to the person/entity claiming it. From its first release, PGP products have included an internal certificate 'vetting scheme' to assist with this; a trust model which has been called a web of trust. A given public key (or more specifically, information binding a user name to a key) may be digitally signed by a third party user to attest to the association between someone (actually a user name) and the key. There are several levels of confidence which can be included in such signatures. Although many programs read and write this information, few (if any) include this level of certification when calculating whether to trust a key. The web of trust mechanism has advantages over a centrally managed Public key infrastructure scheme such as that used by S/MIME but has not been universally used. Users have been willing to accept certificates and check their validity manually or to simply accept them. The underlying problem has found no satisfactory solution.
In the OpenPGP specification, trust signatures can be used to support creation of certificate authorities. A trust signature indicates both that the key belongs to its claimed owner and that the owner of the key is trustworthy to sign other keys at one level below their own. A level 0 signature is comparable to a web of trust signature since only the validity of the key is certified. A level 1 signature is similar to the trust one has in a certificate authority because a key signed to level 1 is able to issue an unlimited number of level 0 signatures. A level 2 signature is highly analogous to the trust assumption users must rely on whenever they use the default certificate authority list; it allows the owner of the key to make other keys certificate authorities.
PGP versions have always included a way to cancel ('revoke') identity certificates. A lost or compromised private key will require this if communication security is to be retained by that user. This is, more or less, equivalent to the certificate revocation lists of centralized PKI schemes. Recent PGP versions have also supported certificate expiration dates.
The problem of correctly identifying a public key as belonging to a particular user is not unique to PGP. All public key / private key cryptosystems have the same problem, if in slightly different guise, and no fully satisfactory solution is known. PGP's original scheme, at least, leaves the decision whether or not to use its endorsement/vetting system to the user, while most other PKI schemes do not, requiring instead that every certificate attested to by a central certificate authority be accepted as correct.
To the best of publicly available information, there is no known method which will allow a person or group to break PGP encryption by cryptographic or computational means. Early versions of PGP have been found to have theoretical vulnerabilities and so current versions are recommended. In addition to protecting data in transit over a network, PGP encryption can also be used to protect data in long-term data storage such as disk files.
The cryptographic security of PGP encryption depends on the assumption that the algorithms used are unbreakable by direct cryptanalysis with current equipment and techniques. For instance, in the original version, the RSA algorithm was used to encrypt session keys; RSA's security depends upon the one-way function nature of mathematical integer factoring. Likewise, the secret key algorithm used in PGP version 2 was IDEA, which might, at some future time, be found to have a previously unsuspected cryptanalytic flaw. As current versions of PGP have added additional encryption algorithms, the degree of their cryptographic vulnerability varies with the algorithm used. In practice, each of the algorithms in current use is not publicly known to have cryptanalytic weaknesses.
Any agency wanting to read PGP messages would probably use easier means than standard cryptanalysis, e.g. rubber-hose cryptanalysis or black-bag cryptanalysis i.e. installing some form of trojan horse or keystroke logging software/hardware on the target computer to capture encrypted keyrings and their passwords. However, it is important to note that any such vulnerabilities apply not just to PGP, but to all encryption software.
New versions of PGP are released periodically and vulnerabilities that developers are aware of (note emphasis and its significance) are progressively fixed