Basically, the idea of the hack is that with proper tools, a certain person or lets say a hacker can change the "reply to" address while sending information is from someone you know. Hackers can use this method on varying ways ,to fool unaware users, like asking for account information by posing as bank , or a website administrator or a family member.
This hack is not only applicable to iPhone. According to apple, makers of iphone, every phone that uses sms is vulnerable to this exploit. Its a limitation of sms protocol and not iPhone's sms implementation only.
How do we protect ourselves?
Apple is urging its users to use iMessage instead but it will be difficult to do since not everyone is subscribe to mobile internet , and not everyone knows how to use iMessage.
A good and working solution or workaround for all cellphone user is :
If somebody asks for a sensitive information on text, call that person and double check if he is really asking for that info.Its better if you call that person using your phone's contact list instead of calling back to the number that appears on the text message. You can also use other medium of conversation to double check like facebook messenger, or IM chat, or BBM if you have it.