The term spyware is actually a catchall used to cover a range of evils, including those that do not technically meet the definition of spyware. It refers to applications installed on your PC that in some way negatively affect your computing experience, suck up computing resources or potentially present privacy and security risks. Spyware ranges from the merely annoying to the potentially devastating. It's most common incarnations include:

Adware: This is software that delivers unsolicited advertising to your PC. Sometimes that advertising is "targeted" based on the information provided by spyware.

Hijackers and malware: These are applications that force your PC to do something undesirable. The most benevolent of such programs might change your homepage or install a "Browser helper object" (BHO) that annoyingly adds a bar to the Internet Explorer interface with links to a vendor's Web site. The worst such applications might use your PC to visit Web sites to generate hits on pay-per-click ads, dial 1800 numbers using your modem or even offer up your PC's processing power for use in distributed applications.

Spyware: Perhaps the most insidious form, a true spyware application is a program that in some way monitors your activity while you use your PC, and transmits that information back to the spyware software creator. Some might monitor which Web sites you visit (usually to deliver targeted advertising to your system), record information you type into online forms (including, for instance, credit card numbers) or log your keystrokes when you're using the PC.

In its worst forms, spyware closely resembles viruses, so much so that the distinction between the two is often hard to make. The key distinction is that while viruses are usually purely malicious, spyware most often has some purpose - to track your activities, force feed you advertising, change your browser activates and so on.

Unlike viruses, spyware is also often, in a sense, legitimate. Spyware is nearly always bundled with free software, and frequently the purveyors of that free software see the presence of spyware on your system as the "price" for using that software. For instance, a free FTP program might come bundled with Aureate, an adware package. When you install the FTP program, Aureate software is installed along with it. Aureate then pays the FTP software supplier.

Whether the software vendor tells you that it's installing the spyware is another matter. Many software vendors are quite up-front about it, informing you that the software being installed is part of the requirements of the licence agreement. Some even tell you that the bundled spyware is beneficial to you. Other spyware-bundlers, however, bury the information about bundled spyware deep within the software license agreement (which they know nobody reads), or fail to tell you about it at all.

A considerable majority of PCs connected to the Internet are currently estimated to be infected with some kind of spyware, although many instances of infection may be from low-security risks like cookies. Anything that you can download for free - and even some things that you pay for - may have spyware included. In some cases, such as with the Divx video coder/decoder, you can get a spyware carrying version at no cost or pay to get a spyware-free version. 

Peer to peer (P2P) applications are probably the best known carriers of spyware, perhaps unfairly since many, if not most, of the popular P2P applications do not carry spyware. The sheer number of people who have installed some kind of P2P application, especially spyware-riddled Kazaa, has been a major source of spyware infection, however.

Here's a quick breakdown of the spyware risk in different types of free downloadable applications:

• Very high risk applications include free downloaded screensavers, media players, desktop icons and "smiley" emoticon packages, desktop assistants, digital pets (such as the infamous Bonzi Buddy) and other desktop "enhancements". These are packages that children, in particular, are inclined to download because they're "cute." Quite simply, these programs should be avoided at all costs - they're nearly guaranteed to carry spyware.
• Medium risk applications carry a moderate to good chance of carrying spyware, although often with these packages its presence is more explicit; that is, they tell you about it when they're installing it. Peer to peer applications (most notably Kazaa, BearShare, Imesh, LimeWire, Grokster and Morpheus), free utility programs (such as FTP clients, firewalls or file managers) and small downloadable games fall into this category.
• Low risk applications include packages from major software vendors such as Microsoft, Adobe, Symantec and the like, along with open source applications hosted at places like SourceForge. While open source applications rarely carry spyware, on some occasions unscrupulous individuals have compiled and re-packaged open source applications with spyware.