[bzbarsky]

It will evaluate scripts with the permissions of the element being manipulated. Which in a normal webpage is the same thing as the script doing the manipulating, which means you have XSS, which is bad, yes.

In the context of an extension manipulating a web page, though, the jQuery thing you quote will evaluate the script with the permissions of the web page, not the permissions of the extension. On the other hand, doing eval() with a string from the web page will evaluate things with the permission of the extension.

So there is a pretty subtle (and irrelevant in web pages!) but important distinction between the two kinds of script injection here. In a web page they are more or less equivalent in terms of leading to XSS if you have untrusted input. But in an extension, the jQuery one is OK if your input comes from the web page itself, and the eval() version is not.

[Disclaimer: I work for Mozilla, but not on extension policy.]