Spyware is similar to a Trojan horse in that users unwittingly install the product when they install something else. A common way to become a victim of spyware is to download certain peer-to-peer file swapping products that are available today.

Aside from the questions of ethics and privacy, spyware steals from the user by using the computer's memory resources and also by eating bandwidth as it sends information back to the spyware's home base via the user's Internet connection. Because spyware is using memory and system resources, the applications running in the background can lead to system crashes or general system instability.

Because spyware exists as independent executable programs, they have the ability to monitor keystrokes, scan files on the hard drive, snoop other applications, such as chat programs or word processors, install other spyware programs, read cookies, change the default home page on the Web browser, consistently relaying this information back to the spyware author who will either use it for advertising/marketing purposes or sell the information to another party.

Licensing agreements that accompany software downloads sometimes warn the user that a spyware program will be installed along with the requested software, but the licensing agreements may not always be read completely because the notice of a spyware installation is often couched in obtuse, hard-to-read legal disclaimers.

See The Difference Between Adware & Spyware in the Did You Know...? section of Webopedia.
Also see How to Deal With Pop-Ups in the Did You Know...? section of Webopedia.

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Spychecker
Lists almost one thousand spyware products by name.

Inside Spyware: A Guide to Finding, Removing and Preventing Online Pests
Online pests can range from the annoying to the downright dangerous. This Intranet Journal guide takes a step-by-step approach to diagnosing, removing and preventing spyware infestations.

The Big Lie about Spyware and Adware
'Spyware' and 'adware' aren't always synonymous. The difference is important for affiliates to understand.

Webopedia's "Did You Know" Section
The Difference Between Adware & Spyware.

Webopedia's "Did You Know?" Article
The Difference Between a Virus, Worm and Trojan Horse.