In Eclipse Theia versions up to and including 1.69.0, opening a folder starts source control integration without requiring the user to trust the folder first. This affects applications built on Theia that include the git integration, such as the Theia IDE. Both Theia's own @theia/git extension and the builtin VS Code git extension run git commands such as git status as soon as a repository is detected. Since git honors repository-local configuration, a folder containing an attacker-controlled .git/config with core.fsmonitor (or a comparable hook-like setting) causes the configured command to be executed. The configuration can be delivered by burying a bare repository inside a regular repository (OVE-20210718-0001), so cloning an attacker-supplied repository and opening it in a Theia-based application is sufficient to execute arbitrary commands with the privileges of the user, without any confirmation prompt.
As of 1.70.0, plugins that declare capabilities.untrustedWorkspaces.supported: false, which includes the builtin git extension, are no longer loaded or activated in an untrusted workspace, and the deprecated @theia/git extension has been removed, so no git command is executed against an untrusted folder.