Spyware is software that secretly monitors, and potentially controls, a computer system without the users knowledge. The term is fairly self-explanatory: spyware; spy, software. The security severity of spyware varies greatly: tracking cookies, for example, are a low risk example of spyware, which records a users browsing habits at a specific website. A more severe example of spyware are keyloggers: keyloggers secretly record keystrokes, such as login details, and can be used to engage in identity theft.
Generally speaking, spyware monitors computer usage, or, delivers
adverts (adware). Companies and individuals who spread spyware usually
sell the information they collect - surfing habits etc - to third
party companies who can use the information (usually for advertising)
for commercial profit. Some notable companies / programs have knowingly
packaged spyware within their software: the Kazaa and Morpheus file
sharing programs, for example. Whether these companies profited
from the spyware directly, or, were paid by a spyware company to
install their software remains unknown.
Therefore, spyware can be installed when a user downloads and installs a genuine computer program (often freeware or shareware software) - the user being unaware that they are installing the additional spyware software. Spyware differs from a virus, because spyware does not attempt to replicate itself and spread itself to other computer systems. Spyware is spread by either being bundled with legitimate software, or, by exploiting security holes in Internet applications like web browsers.
There are programs - like Ad-aware and Spybot Search & Destroy- that scan computers for spyware and can remove it. However, some advertisement banners promote anti-spyware programs that are actually spyware, and, are infact, a trojan horse program which will exploit a computer system. Therefore, it is vital that a user installs a legitimate anti-spyware program.