Spyware can be broken down into two different categories, surveillance spyware and advertising spyware.

Surveillance software includes key loggers, screen capture devices, and trojans. These would be used by corporations, private detectives, law enforcement, intelligence agencies, suspicious spouses, etc.

Advertising spyware is software that is installed alongside other software or via activex controls on the Internet, often without the user's knowledge, or without full disclosure that it will be used for gathering personal information and/or showing the user ads. Advertising spyware logs information about the user, possibly including passwords, email addresses, web browsing history, online buying habits, the computer's hardware and software configuration, the name, age, sex, etc. of the user.

As with spam, advertising spyware uses the CPU, RAM, and resources of the user's computer, making the user pay for the costs associated with operating it. It then makes use of the user's bandwidth to connect to the Internet and upload whatever personal information it has gathered, and to download advertisements which it will present to the user, either by way of pop up windows, or with the ad banners of ad-supported software. All of this can be considered theft in the cases of advertising spyware that installs without disclosure.

Who are the main purveyors of spyware?
The biggest culprits in spreading spyware are the popular peer-to-peer programs available today. Bearshare, Kazaa, Imesh, Limewire - all of these products install multiple advertising spyware applications. It's gotten so bad that I now assume all p2p programs bundle spyware unless I've tested them personally.

The problem with spyware.
My objection to spyware is not just the loss of privacy. That's bad enough. What is also repulsive are the methods these companies use to present users with their advertisements. They spawn pop up and pop under ads, latch onto the Internet Explorer browser like leeches to force the start and search pages to their "partner" sites, make advertisements out of plain text on web sites where they have no arrangement with the author of the content.

Often these advertisements are pornographic in nature and make no allowance for underage users who may be using the computer.