Why is gets() dangerous

The first internet worm (the Morris Internet Worm) escaped about 30 years ago (1988-11-02), and it used gets() and a buffer overflow as one of its methods of propagating from system to system. The basic problem is that the function doesn't know how big the buffer is, so it continues reading until it finds a newline or encounters EOF, and may overflow the bounds of the buffer it was given.

You should forget you ever heard that gets() existed.

The C11 standard ISO/IEC 9899:2011 eliminated gets() as a standard function, which is A Good Thing™ (it was formally marked as 'obsolescent' and 'deprecated' in ISO/IEC 9899:1999/Cor.3:2007 — Technical Corrigendum 3 for C99, and then removed in C11). Sadly, it will remain in libraries for many years (meaning 'decades') for reasons of backwards compatibility. If it were up to me, the implementation of gets() would become:

char *gets(char *buffer)
{
    assert(buffer != 0);
    abort();
    return 0;
}

Given that your code will crash anyway, sooner or later, it is better to head the trouble off sooner rather than later. I'd be prepared to add an error message:

fputs("obsolete and dangerous function gets() called\n", stderr);

Modern versions of the Linux compilation system generates warnings if you link gets() — and also for some other functions that also have security problems (mktemp(), …).

Alternatives to gets()

fgets()

As everyone else said, the canonical alternative to gets() is fgets() specifying stdin as the file stream.

char buffer[BUFSIZ];

while (fgets(buffer, sizeof(buffer), stdin) != 0)
{
    ...process line of data...
}

What no-one else yet mentioned is that gets() does not include the newline but fgets() does. So, you might need to use a wrapper around fgets() that deletes the newline:

char *fgets_wrapper(char *buffer, size_t buflen, FILE *fp)
{
    if (fgets(buffer, buflen, fp) != 0)
    {
        size_t len = strlen(buffer);
        if (len > 0 && buffer[len-1] == '\n')
            buffer[len-1] = '\0';
        return buffer;
    }
    return 0;
}

Or, better:

char *fgets_wrapper(char *buffer, size_t buflen, FILE *fp)
{
    if (fgets(buffer, buflen, fp) != 0)
    {
        buffer[strcspn(buffer, "\n")] = '\0';
        return buffer;
    }
    return 0;
}

Also, as caf points out in a comment and paxdiablo shows in his answer, with fgets() you might have data left over on a line. My wrapper code leaves that data to be read next time; you can readily modify it to gobble the rest of the line of data if you prefer:

        if (len > 0 && buffer[len-1] == '\n')
            buffer[len-1] = '\0';
        else
        {
             int ch;
             while ((ch = getc(fp)) != EOF && ch != '\n')
                 ;
        }

The residual problem is how to report the three different result states — EOF or error, line read and not truncated, and partial line read but data was truncated.

This problem doesn't arise with gets() because it doesn't know where your buffer ends and merrily tramples beyond the end, wreaking havoc on your beautifully tended memory layout, often messing up the return stack (a Stack Overflow) if the buffer is allocated on the stack, or trampling over the control information if the buffer is dynamically allocated, or copying data over other precious global (or module) variables if the buffer is statically allocated. None of these is a good idea — they epitomize the phrase 'undefined behaviour`.

There is also the TR 24731-1 (Technical Report from the C Standard Committee) which provides safer alternatives to a variety of functions, including gets():