To the computer folks, can you explain to people like me that do not know/understand what would be the point of this "hack" and how it happened if the server was not supposed to access the internet? Why would any government system have low security settings as stated in the article? What could have happened if this breach has not been manually located, and what is the possibility such like things sitting there that have not even been detected?
http://online.wsj.com/articles/hacker-breached-healthcare-gov-insurance-site-1409861043
I can't read that article (I don't have a subscription), but I can try answering your questions as is.
If the server could not access the internet at all, then that really does suggest that the DDoS software was very likely not the main payload - more malware could have been on the way, or even already installed. Perhaps it was used to test to see if they could just get any malware onto the machine. DDoS software (Distributed Denial of Service) is malware that is used to cause traffic jams on a network, in order to paralyze access to resources - it is what gets used to prevent access to websites for example. Other possibilities exist, but DDoS software is generally not as effective on devices that can't reach out to the internet - from an internal test server it *could* still cause a decent bit of mayhem on whatever internal network that server was on, or, since the hackers clearly had a way on to the machine, they could have directed traffic back out the way they came. How smart this would be depends on the local network design, as it could be anything from being easy to do, to being easy to set off alarms.
Lower security relative to other systems will always exist, as higher security comes with more restrictions on usability - while it would be nice to have the full organization's security applied to every device, it isn't always realistic. *How* much lower the security was for this server, and in what ways.....*shrug*. Chances are that is information that will not be publicly released as part of any investigations findings due to sensitivity.
How it happened isn't something that can really be answered with currently available knowledge - how segregated from the internet was this machine, what security was or was not in place, where was this machine within the internal network, etc.
What could have happened if it hadn't been located is also a big question - anything from "nothing" to "hackers now effectively own the entire internal network". This is a complete unknown until all potentially affected systems have been completely segregated from everything else, and get thoroughly checked, multiple times. It really depends on who did this, what they wanted from this system, and whether the DDoS malware was all that they put onto the network - however I would wager that there is a strongly non-zero probability that there could be more malware on the particular server or on other machines.
I know some of you on here are more directly involved with IT on a daily basis than I am, so any corrections, additions, etc would be appreciated.