Introduction
Recently I've seen a few posts that annoy me because people are talking about IS in a way that shows they don't know what their talking about it, so instead of channeling my annoyance into the posts (which won't help), I'm going to make a little informational post to hopefully help anyone who is new to IS or has never really figured out how it all works. On a side note I made a post with a lot of the information posted here but I think it was deleted since I can't find it now ;P
First things first, Inner Space is not a bot. A lot of people know this but I'm just clearing it up right off the bat. People talk of IS like it is the same thing as Glider is. Inner Space is simply a platform for developers to write their bots for. You can easily see this when you go to purchase it because as you see here it mentions nothing of a bot. People don't get banned for using Inner Space, because IS alone (no extensions) is about as harmful to WoW as FRAPS is. EDIT: While IS really is about that harmless, Blizzard apparently does ban for just it (as posters have corrected me), so be careful.
Now at one point and time (I don't know exactly when or who) someone decided to make an IS extension for World of Warcraft. This extension allows programmers to have access to WoW's memory (to get information about where the character/mobs are located, cast spells, basically all interaction with WoW). ISXWoW reads and writes to WoW's memory, that's all, it isn't a bot either.
Of course Blizzard doesn't like people messing around in WoW's memory, so they started to scan for ISXWoW. This is how ISXWarden was born. It is also an extension for Innerspace, one that is designed to keep Blizzard's Warden happy. For a history lesson in ISXWarden, you have to start back with a really old version of ISXWoW (pre BC). Originally maytricksmath wrote the Warden protection right into ISXWoW. The story goes that one day Lax got his own WoW account banned and then he made the ISXWarden extension that we all know and love. I'll also take this chance to point out he has a blog, OnWarden, that has some very interesting posts about Wardens workings (for those who wish to learn even more).
Bannings
Anyone who has been botting for a while knows that when you bot, you should expect that account to get banned. It's all a matter of chance when you bot... the longer you bot for the higher your chances of getting hit with the ban stick are. It will happen, if you care about the account, DONT BOT IT. I, like many others, learned this the hard way. The only bots that are unlikely to be banned are the private ones. If Blizzard doesn't get ahold of them, it won't know what to scan for, and thus it is more likely to go undetected (think of it as if Warden were scanning for a virus, if it doesn't know what the virus looks like then it won't assume its dangerous). Of course to the majority of people out there, this information won't help you much because you won't be writing your own bots anytime soon lol.
Okay, time to talk about banning related to Inner Space and Glider. Glider had basically been trying to stay undetected by hiding itself in a rootkit, only reading memory, and sending keypress's to make itself seem like a real person. The problem is that Warden is a bit more complicated than that (at a minimum I know it can scan for rootkits) and was banning Glider users left and right. One banwave hit Glider particularly hard and Merc went to Lax for the protection that ISXWarden gave Inner Space users. Probably nobody except for Lax/Merc knows the arrangement between them, but Lax has some form of ISXWarden working to protect Glider now too (Note: "some form", they are not the same but most likely offer very similar protection).
As far as I see it, this was beneficial to Blizzard. It took two different major botting organizations and merged them under one roof. So now, whenever Blizzard comes out with a new way to beat ISXWarden, generally IS and Glider users will be hit with a ban wave at the same time.
Dealing with this whole issue there is another point I'd like to make. Some people here use bots like zolofighter, which they think is safe because it isn't being banned for at the moment. It is only as safe as the number of people who use it. Because 90% of the botters out there are most likely using IS/Glider to do their botting, Blizzard will obviously be working to ban them and not the assortment of little bots you may find on this site. At some point and time, especially if people get fed up with IS/Glider and switch over, Blizzard will just turn their eye over to whatever new bot is out there. Most likely it's defenses are not as good as Glider/IS and Blizzard won't have any trouble detecting it (especially after beefing up their Warden to detect the more advanced bots). Despite this though, for temporary safety, your best bet is to go with the newest and most unused bot out there.
Added July 30:
Okay, heres another thing that I've thought to talk about. Why during ban waves there's always those few people who don't get banned. Well Blizzard is being very tricky at this point. Say out of 500 people banned they choose a lucky 5 or 10 and don't ban them. Well then when those people go back and make their ban reports, the forums look like this: "lost 2x 70s, gg wow", "finally hit me 5 chars gone", "I didn't get banned because I renamed IS.exe to AIM.exe!"
This helps add to the hell and confusion that ban wave days are. This is why if you ever do get banned, you need to fill out a report with the templates that each site provides. This will greatly help administrators filter out what the need from the reports.
Here's another thing which was brought up in the replies. Player reports. Ban waves are not caused by player reports, whenever a large mass of people are banned it is software detection. That simple. Now, to tie this in with the above paragraph, Blizzard probably does toss in a few player reported botters in ban waves, to add to the confusion.
Other
Scan.dll is not a serious threat to anyone. For some reason people believe they can stop the multimillion dollar company Blizzard by simply moving this to the trash, or putting some administrator rights on it. Last I heard this only had to do with scanning MPQ files for changes (which I think Blizzard has turned off right now, correct me if I'm wrong). Seriously, if you see people scheming to avoid detection via scan.dll, you laugh at them.
Conclusion
There was actually more I wanted to cover... I think.. But the problem is that after nearly an hour of writing and editing this that my brain is a little zonked :P Please post opinions, corrections, flames, questions, ect. I plan on adding/editing this over the next couple days, so give me some material to cover
After reading some of the replies that talk about how we have no idea what Warden does, I highly suggest people read Lax's OnWarden blog.