Some people mistake spyware for a computer virus. A computer virus is a piece of code designed to replicate itself as many times as possible, spreading from one host computer to any other computers connected to it. It usually has a payload that may damage your personal files or even your operating system.

Spyware, on the other hand, is generally not designed to damage your computer. Spyware is broadly defined as any program that gets into your computer without permission and hides in the background while it makes unwanted changes to your user experience. The damage it does is more a by-product of its main mission, which is to serve you targeted advertisements or make your browser display certain sites or search results.

At present, most spyware targets only the Windows operating system. Some of the more notorious spyware companies include Gator, Bonzi Buddy, 180 Solutions, DirectRevenue, Cydoor, CoolWebSearch, Xupiter, XXXDial and Euniverse.

According to recent estimates, more than two-thirds of all personal computers are infected with some kind of spyware.

Src: http://computer.howstuffworks.com/spyware.htm