i am surprised by the response of some of the first posters who suggest that friendly fire is okay if you talk about it and agree to it ooc first. i agree with the more recent posters who are saying that what matters is ic.
would your character be willing to put other characters at risk? how will they react? are they okay with that? i think most people would not. i could see some particularly dare devil characters, or a particularly stupid barbarian who doesn't even realize where the attack comes from, but i think most reasonable people would be upset at getting hammered by a friendly fireball.
if you take significant damage from a spell, in character, you aren't thinking, oh, well, i had plenty of hps in reserve. you're thinking, damn, that hurt, and could have killed me.
but at the same time, the decision to do it, or not to do it, should be based on what your characters would think about it. i'm sure certain characters would put their companions at risk and not think twice. and others may just panic and not think of the consequences. it's a situation rife for good role playing.
so i think taking the discussion out of character robs you have some juicy in game drama.