Spyware is a common name for software that is installed automatically on your hard drive when installing another program. Spyware is often unwanted advertisement software (adware). The makers of the Spyware usually pay the developer of the "main" software a fee to have them distribute the Spyware included in the main software. Distributing Spyware is a common way to make money for developers of free software such as KaZaA.

”Spyware is a relatively new kind of threat that common anti-virus applications do not yet cover. If you see new toolbars in your Internet Explorer that you didn't intentionally install, if your browser crashes, or if you browser start page has changed without your knowing, you most probably have spyware. But even if you don't see anything, you may be infected, because more and more spyware is emerging that is silently tracking your surfing behaviour to create a marketing profile of you that will be sold to advertisement companies.”
What does Spybot - Search & Destroy do?

The frequent use of Spyware means that Internet users often need a Spyware eliminator. Recently, PC Magazine compared and ranked some of the most popular Spyware eliminators.

The best Spyware eliminators according to PC Magazine:

1. SpyBot Search & Destroy    
2. Ad-aware 6
2. Aluria's Spyware Eliminator  
2. BPS Spyware/Adware Remover  
5. Spy Remover 5.0   
6.  Internet Cleanup 3.0  
6.  PestPatrol 4.1  
6. QuickClean 3.0
6. SpySweeper 1.03

PC Magazine: Spyware: It's Lurking on Your Machine.   
 
SpySweeper 1.03, the best Spyware eliminator in the comparison, has very impressive properties. For example it removes:

adware and spyware
dialers
keyloggers
trojans and other baddies
usage tracks.

We also tested and compared the free utilities SpyBot Search & Destroy and Ad-aware 6. Clearly, SpyBot Search & Destroy was much more efficient searching and destroying spyware.