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Unwanted computer programs can cause any number of unpleasant effects, including the following.
Malware, short for MALicious softWARE, is the term for all software installed without your consent. Viruses, worms, trojans, bots, spyware, and adware are all forms of malware. Frequently a piece of malware will exhibit characteristics of more than one specific variety. Any of them can potentially do any of the things listed above.
All of the examples below are taken from real malware.
A virus is a piece of malicious software with the ability to replicate itself. Strictly speaking, they spread by attaching to legitimate files and waiting for users to distribute them. People frequently refer to any kind of malware as a virus, however.
For example, you download a copy of the game Half-Life from a peer to peer network. That file really contains Half-Life, but it is also infected with a virus. You send the file to a friend who then also becomes infected.
Like viruses, worms are self-replicating pieces of software. Unlike viruses, however, they spread on their own without waiting for people to distribute them, making them much more dangerous.
For example, you recieve an email message from a friend and open what looks like an attached picture. The picture is really an email worm, which sends itself to all of the people in your address book. In this case, the program is also acting as a Trojan.
Trojan horse programs, or simply Trojans, are malicious pieces of software that try to trick you into running them by pretending to be something else. Unlike worms and viruses, they may not seek to replicate themselves.
For example, you might recieve a virtual postcard by email. The "postcard" would really be a Trojan horse that would infect your computer.
Bots are sophisticated remote control programs. When your computer is infected by one, the bad things it might do aren't limited by the bot creator's original intentions. The people controlling the bot can make it do virtually anything they want, which is always bad news for you. They are frequently assembled in networks, called Botnets.
For example, you receive an IM message from a friend asking about a picture she wants to put on MySpace. When you try to view the picture, your computer is infected with a bot. The bot controller then tells the bot to steal your passwords, send spam through your computer, and send out more IMs to your friends trying to infect them. In this case, the program is also acting as a Trojan and a Worm.
Spyware falls into a gray area between clearly legal and clearly illegal software. Typically it doesn't do any of the worst malware things like deleting files or stealing passwords. Instead, it is installed without your knowledge and monitors your computer use to help its makers build a profile about you, often for advertising use.
For example, you download a special video player program that you see advertised on a web site. A piece of spyware is also silently installed when you install the player. From then on, it monitors what web sites you visit, what you search for, and what key words you use in Microsoft Word, then reports back to the spyware maker.
Like spyware, adware falls into a legal gray area. It is installed without your knowledge, and puts additional advertising in the programs and web sites you already use. Frequently this advertising is for sexually explicit or illegal content.
For example, you visit a web page and a dialog box pops up asking you to install a web browser toolbar. If you agree (and maybe even if you don't), adware gets installed on your computer. From then on, whenever you launch your web browser, your home page is replaced with a porn site and many other web pages have extra pop-up ads.