As with any such story, there are bits we know and bits we have to speculate about. Speculation is more fun, so let's start there:
Once upon a time there was a company -- let's call them ACME Inc -- who really didn't trust its employees. For ACME the solution was vigilance. Constant, invasive vigilance. ACME's IT department was given the task of intercepting every packet sent to and from the corporate network, which seemed straightforward; until someone pointed out that they could intercept all the packets they wanted, but they couldn't necessarily read them. Especially not the ones encrypted with SSL/TLS.
Now this isn't a killer. ACME had a few options: they could (a) block SSL/TLS at their network gateway, forcing everyone to use cleartext connections. They could (b) force their employees to use some awkward SSL proxy. If they were feeling ambitious, they could even (c) run a man-in-the-middle on every SSL connection initiated from within their corporate network. The last option would result in some awkward certificate errors, however -- which would be unpleasant for web users, and downright nasty for embedded devices or headless boxes.
But really, each of these solution is just a different version of flypaper. Why catch flies with flypaper, when you can totally screw with the trust model of the Internet?
And this is where we get to the facts. A few years back ACME -- or some company like ACME -- approached Trustwave with this problem. Trustwave seemed like a good group to ask, since they're one of the select few companies that make SSL certificates, i.e., they're one of the 'authorities' whose root certs are built into all of the major browsers and OSes.
Somehow the two companies cooked up the following plan. Trustwave would generate a new 'subordinate root' certificate with full signing authority. Anyone who possessed the signing key for this cert would essentially be Trustwave -- meaning that they could vouch for any website they wanted. Of course, such a key would be enormously valuable (and dangerous). No responsible CA would allow such a thing to leave their facilities.
But apparently Trustwave's motto is 'think different'. So they cheerfully packed the signing key into a Hardware Security Module and sent it over to ACME. From that point on, ACME possessed the ability to transparently impersonate any SSL website on the Internet.
And impersonate they did; whenever some client initiated an SSL connection from within ACME's corporate network, an ACME server would intercept the connection, sign a fresh certificate on the requested domain, then deliver that cert back to the client. To the client, it appeared that the connection went through perfectly. But of course the client was now talking to ACME's server, not to the company whose name was on the certificate. ACME would in turn connect on to the target SSL server, thus completing the connection.
Technically this tampering wasn't totally invisible; a clever user might notice that every certificate was now signed by Trustwave -- and comparison with certificates received outside of ACME's network would clearly reveal something funny going on. But since the vast majority of web users don't check this kind of thing, the interception was basically transparent.
Now I hope I don't need to tell you why this is a bad idea. Let's just take it a a given that this is a bad idea. Even Trustwave now realizes it's a bad idea, and have 'proactively' revoked the cert to make sure the evil thing doesn't fall into the wrong hands. From their blog post about it:
Trustwave has decided to be open about this decision as well as stating that we will no longer enable systems of this type and are effectively ending this short journey into this type of offering.
I guess we can at least be thankful that Trustwave has decided to be open about this decision, despite the fact that they weren't open about it while it was happening. Let's all hope this is really the last journey Trustwave plans to take into this type of offering, where by 'offering' I mean -- disastrous, short-sighted mistake.