The IOMMU hardware ensures security of the VM's raw device access while the VM is running. The only significant security risk I'm aware of is if the VM has a chance to update some firmware (like an option ROM) on the device you give it access to, which may enable it to do evil things when the host system next reboots.

Not all new hardware provides IOMMU. For instance, the i7-4770K does not have the VT-d extension, which is Intel's version of IOMMU. [1]

[1] = http://ark.intel.com/products/75123/Intel-Core-i7-4770K-Proc...

Right, Intel's an ass about product segmentation. But most hypervisors don't offer the option of doing any sort of PCI passthrough without a functional IOMMU, so they're not accidentally exposing anyone.

It would be sensible for hypervisors to require IOMMU for all PCI passthrough, but it looks like Xen allows it without IOMMU for paravirtualised guests:

"VT-d Pass-Through is a technique to give a domU exclusive access to a PCI function using the IOMMU provided by VT-d. It is primarily targeted at HVM (fully virtualised) guests because PV (paravirtualized) pass-through does not require VT-d (altough it may be utilized too)."[1]

[1] = http://wiki.xenproject.org/wiki/VTd_HowTo