Security risk of PING?
The ICMP Echo protocol (usually known as "Ping") is mostly harmless. Its main security-related issues are:
In the presence of requests with a fake source address ("spoofing"), they can make a target machine send relatively large packets to another host. Note that a Ping response is not substantially larger than the corresponding request, so there is no multiplier effect there: it will not give extra power to the attacker in the context of a denial of service attack. It might protect the attacker against identification, though.
Honored Ping request can yield information about the internal structure of a network. This is not relevant to publicly visible servers, though, since those are already publicly visible.
There used to be security holes in some widespread TCP/IP implementations, where a malformed Ping request could crash a machine (the "ping of death"). But these were duly patched during the previous century, and are no longer a concern.
It is common practice to disable or block Ping on publicly visible servers -- but being common is not the same as being recommended. www.google.com responds to Ping requests; www.microsoft.com does not. Personally, I would recommend letting all ICMP pass for publicly visible servers.
Some ICMP packet types MUST NOT be blocked, in particular the "destination unreachable" ICMP message, because blocking that one breaks path MTU discovery, symptoms being that DSL users (behind a PPPoE layer which restricts MTU to 1492 bytes) cannot access Web sites which block those packets (unless they use the Web proxy provided by their ISP).
ICMP has a data component to it. It can be used to build tunnels, and this is not just a theory thing, it's available in the wild. It's been found by several different researchers as parts of malware toolkits. Not to mention there is a prominent howto on this topic, not to mention the wiki, or the hackaday
ICMPTX uses the ICMP echo and ICMP reply. ICMP echo is not always harmless, since it contains a data component, it can be exfiltrating data or being used as a control channel, or being used (in the case of ICMPTX) as a tunneling protocol.
Current implimentation in distribution, with howto, (ICMPTX): http://thomer.com/icmptx/
Real attack scenario using ICMP data transmission for payload injection: Open Packet Capture
Use of an ICMP data transmission protocol via similar methods to ICMPTX(2006) for trojan C&C and Exfiltration: Network World
It is true that ICMP can be used by attackers to gain information, transport data covertly, etc. It is also true that ICMP is extremely useful, and that disabling it can often cause problems. Traceroute does in fact use ICMP, so disallowing certain ICMP types will break it.
The question highlights the classic balance of security and functionality, and it's up to you to determine how much functionality you're willing to lose to gain x amount of security.
One recommendation is to allow only certain types (the most commonly used), and disable all the others. Here are my iptables rules. Keep in mind that these are allowed because everything else is disallowed by default.
# Allow incoming ICMP: ping, MTU discovery, TTL expired
/sbin/iptables -A INPUT -i eth0 -p icmp -d $YOURBOX --icmp-type 8/0 -j ACCEPT
/sbin/iptables -A INPUT -i eth0 -p icmp -d $YOURBOX --icmp-type 3/4 -j ACCEPT
/sbin/iptables -A INPUT -i eth0 -p icmp -d $YOURBOX --icmp-type 11/0 -j ACCEPT