I had look at the code but I couldnt see any escaping on funcions like the_title the_content the_excerptetc. I might not be reading it right. Do I need to escape these functions in theme development like:
esc_html ( the_title () )
Edit: as pointed out in the answers below the above code is wrong regardless - the code should have read
esc_html ( get_the_title () )

the_contentwhich outputs HTML from the TinyMCE editor, in which you input. This is more so reserved for form inputs or data created on the front end for example by your users. – userabuser May 18 '12 at 16:40