With unconfirmed rumors about nations like Iraq having quantities of the smallpox virus (for use as a biological weapon), the U.S. Department of Defense announced it has a million doses of smallpox vaccine and is ready to vaccinate up to half a million American troops on short notice. Smallpox vaccination was halted in the United States in the early 1970s and most American troops have never been vaccinated. Once one is vaccinated, the effect wears off in two or three decades.
But the fear of smallpox is rather overstated. When the final push to wipe out smallpox was made in the 1970s, much detailed information was collected on exactly how fast the disease spreads. The fact is, it spreads rather slowly. This was particularly true in the poor nations where the virus made it's last stand. Even in crowded Third World cities, a person with the virus might only infect one or two other people before they became noticeably ill and no longer able to move around. Medical personnel have long known that if you isolate someone with smallpox, you will stop the spread of the disease. In a hospital, this meant putting the patient in a single room and having medical personnel take precautions when they provided treatment.
Planning simulations run by the U.S. government used wildly unrealistic transmission rates. The spread of the disease in these simulations can be found nowhere in the vast historical record of smallpox outbreaks.
However, the disease will spread if you don't start vaccinating victims. In the final campaign to eliminate the disease it was found that immediately vaccinating (those not already vaccinated) around the infected person would eventually kill the disease. Smallpox can only live in humans. If an infected person is surrounded by vaccinated people, the virus dies in the infected person (either by killing the victim, or by a surviving persons immune system.)
But smallpox can still be used as a weapon, and it will kill and terrorize a populations. The deaths may be thousands, rather than millions, but the economic disruption and terror will affect millions. Moreover, the smallpox virus is indiscriminate. Let it loose in a nation like the United States, and it could spread world wide before the infected people began to show unmistakable symptoms. Anyone using it has to risk having it blowback into their own population. While a nation like Iraq could tip their hand by starting to vaccinate their entire population, terrorists would have to be a "death to everyone" crusade in order to use smallpox. There are extremist groups that swing that way, but Islamic radicals are not among them.