There is a more recent internet threat than malware like viruses, worms and Trojans. You can pick it up by downloading free software from the internet, by clicking on a pop-up ad, or even by just visiting a web site. This threat is commonly referred to as spyware. In fact this term is used to cover a range of threats.

Spyware is on your computer to serve the purpose of whoever put it there. To gather information about you and to pass it back to another person or organisation. It may be there with your permission (although you probably didn't give your express permission, just clicked 'yes' to a long license agreement without wading though every word.) It may have been put on your computer in secret, by devious means. It may be there for a commercial reason: to target advertising, or it may be there for criminal reasons: to steal from you.

Here are some of the internet threats often grouped together under the heading spyware. (In fact the term spyware itself is perhaps best used to refer to commercial software used to gather personal information: dataminers below.)

Adware
If you download a program from the internet and it has an advertisement screen, displaying an advertisement from one company or another, that's adware. The program will try to connect to the internet to beam the latest advertising to you while you're online. Like the ads on TV, the advertisements will change. It may be worth putting up with the ads to use the program for free: only you can make this choice.

Problems:

Consent - adware may install itself without your explicit permission.
Privacy issues - adware may also contain spyware: see below.
Performance - adware running in the background may cause your system to slowdown or malfunction, especially if several different adware programs are present on your computer.
Removal - can be difficult to remove.

Spyware (Dataminers)
Is there a spy in your computer? Advertisers love to know their market! spyware is an attempt to put a 'market researcher' in your computer, a piece of software which will report on your browsing habits so that advertisers can aim advertisements which they think will be of interest at you. Any spyware which infiltrates your computer is able to pass information back to whoever put it there. This form of spyware usually comes bundled with another piece of commercial software. 

Problems:

Consent- Companies have been known to try to put spyware on computers without the express permission of the user, in fact by "unfair, deceptive or devious practices¹."
Privacy issues - spyware reports on your browsing habits to a third party, and once on your computer, has access to other information on your system which may be passed back over the internet to the creator of the spyware.
Performance - spyware running in the background may cause your system to slowdown or malfunction, especially if several different spyware programs are present on your computer.
Removal - can be difficult to remove. Some aggressive forms of spyware may actively resist removal.

¹Consortium of Anti-Spyware Technology Vendors coast-info.org

Browser Hijackers and BHO's
Browser hijackers change your browser settings, BHO's (Browser Helper Objects, also known as browser plugins) add capabilities to it, often a new toolbar, whilst at the same time making 'under the bonnet' changes: "A component that Internet Explorer will load whenever it starts, shares IE's memory context, can perform any action on the available windows and modules²." (Note IE = Internet Explorer. Non-IE based browsers do not suffer from BHO's, although Firefox uses extensions which may be the next target of spyware companies.)

Problems:

Consent-  Browser hijackers and BHO's may be installed "using covert means³."
Privacy issues -  Browser hijackers "may reroute your info and address requests through an unseen site, capturing that info". Browser plugins may "monitor and report on your actions²." In effect they may be spyware.
Irritation -  Browser hijackers can change your homepage or direct your browser willy-nilly to a particular web site, often a porn site. BHO's can also change your home page.
Performance- Browser hijackers may slow down your browser by rerouting address requests through an unseen site.
Changes to Web Pages- BHO's may add advertisements to or change  advertisements on a web page.

²Pest descriptions by category Pest Patrol
³List of Malware Categories spywareguide.com

Premium Rate Number diallers
"Dialler: A program that, often secretly, changes your dialup connection setting so that instead of calling your local internet provider, your PC calls are routed to an expensive 0900 or international phone number³."

Problems:

Financial loss-  Diallers can lead to enormous phone bills.
Consent- Diallers may be installed deceptively or secretly.

Keyloggers and Trojans
Unlike spyware, which gathers information for commercial purposes, keyloggers and Trojans are tools used to gather information for criminal purposes. Personal information like credit card details and online account passwords are stolen to facilitate theft and fraud.  Keylogger record keystrokes and a Trojan horses allow backdoor access to a computer and the information recorded to be passed to a third party.

Problems:

Consent- Criminal spyware is installed in secret.
Financial loss- Theft of credit card details.
Removal- Keyloggers are used legitimately by employers to monitor their employees, and are so not targeted by traditional anti-virus programs. It is difficult to discover what changes have be made to a system compromised in this way, and what backdoors have been left open for the criminal to use to gain entry to the computer.