Types of Spyware
The single, all-encompassing term “spyware” is more or less a misnomer, for there are a number of different kinds of software that engage in data harvesting and come under the broad, umbrella-like term “spyware”.  Spyware can be loosely associated with virues; Trojans and Worms being the closest relative to viruses, but there is a fine line of difference.  Viruses are typically self-replicating.  They can copy themselves and spread from computer to computer through security holes and exploits, as well as relying on a user’s poor security habits to quietly slip in to an unguarded system.  Spyware usually relies on a user’s ignorance and credulity to infect a system and does not engage in replication.  So, in effect, the first and best form of prevention is awareness.

Adware
Adware, or advertising-supported software, is basically software that displays advertisements on your computer. Adware by itself does not threaten privacy or security.  It is not usually written with the intent to vandalize computer systems or the Internet.  Fundamentally, there were three major influences that led the push behind the development of adware: the failure of selling small, low-priced software in retail packages, the rise of peer-to-peer apps, and the rise of cost-per-click advertising.

Adware helps offset development and maintenance costs of software or website hosting, and in turn, can help provide software and website hosting free of charge.  It can even help turn a profit when software or websites are provided free of charge to users and supported by ads.  Ad supported software is one of the forms of “shareware”.

Certain forms of adware sometimes go overboard and stray into the realm of spyware. They collect personal information and pass it on to third parties without the expressed consent or knowledge of the user in the hopes of providing more specific ad targeting.

BHOs
A BHO, or Browser Helper Object, can be a useful little browser plug-in module, when used legitimately.  For instance, the Microsoft Word plug-in that allows Internet Explorer to read .doc (a.k.a. Word Document) files within their browser is a BHO.  The same goes for Adobe Acrobat’s plug-in for PDF files.  Google Toolbar is also another example of a BHO, but in this case, it is attached to IE’s UI, so it can be used directly by the user.

Because of the free roaming privileges BHOs are allotted within IE, some forms of spyware are installed into IE as BHOs, and can perform a number of tasks.  This can include a keylogger (which usually activates when some sort of HTTP financial service is detected, intending to collect credit card numbers, usernames and passwords), and can record a user’s browsing habits and send the recorded data off to third parties.