Recent occurrences of mobile worms like Cabir, Mabir and CommWarrior have created growing concerns over the security of data stored on mobile devices such as cell phones and PDAs. These worms have in common that they all use Bluetooth communication as their infection channel. In order to prepare effective defense strategies against such worms, we study the nature, characteristics, and spreading dynamics of Bluetooth worms in the safe environment of simulation. Our key findings are: (i) Mobility may not boost the Bluetooth worm propagation; instead, link instability owing to it has negative impact on the worm spreading speed; (ii) The inherent capacity constraints imposed by the wireless channel (e.g. interference) and the specifics of the Bluetooth protocol can significantly slow down the Bluetooth worm propagation; (iii) Intelligently designed worms can improve their propagation speed to a noticeable degree by strategically selecting worm model parameters or exploiting out-of-band propagation capabilities.