Recently I had a personal project I wanted to implement that involved setting up a multi-user Linux server for myself and some of my friends, where the applications we wanted to run required some form of shell access. This presented an interesting predicament: since the particular people using this system were very technically knowledgeable, how could I prevent them from hacking and gaining root access to the server from their shell?

Read the full thing at http://metanautics.wordpress.com/2011/12/24/secure-multi-user-linux-shells-with-jailkit/

After reading this I'm really glad the latest OpenSSH has ChrootDirectory now: http://www.debian-administration.org/articles/590