Malware is a generic term for bad software. The word malware comes from the words malicious and software.
Although there is no official breakdown, we can divide malware into several broad categories of malware: adware, spyware, hijackers, toolbars, and dialers. Many, if not most malware programs will fit into more than one category.
It is very common for people to use the words adware, spyware, and malware interchangeably. Most products that call themselves spyware or adware removers will actually remove all types of malware.
Adware is the class of programs that place advertisements on your screen. These may be in the form of pop-ups, pop-unders, advertisements embedded in programs, advertisements placed on top of ads in web sites, or any other way the authors can think of showing you an ad. The pop-ups generally will not be stopped by pop-up stoppers, and often are not dependent on your having Internet Explorer open. They may show up when you are playing a game, writing a document, listening to music, or anything else. Should you be surfing, the advertisements will often be related to the web page you are viewing.
Programs classified as spyware send information about you and your computer to somebody else. Some spyware simply relays the addresses of sites you visit or terms you search for to a server somewhere. Others may send back information you type into forms in Internet Explorer or the names of files you download. Still others search your hard drive and report back what programs you have installed, contents of your e-mail client's address book (usually to be sold to spammers), or any other information about or on your computer – things such as your name, browser history, login names and passwords, credit card numbers, and your phone number and address.
Spyware often works in conjunction with toolbars. It may also use a program that is always running in the background to collect data, or it may integrate itself into Internet Explorer, allowing it to run undetected whenever Internet Explorer is open.
Hijackers take control of various parts of your web browser, including your home page, search pages, and search bar. They may also redirect you to certain sites should you mistype an address or prevent you from going to a website they would rather you not, such as sites that combat malware. Some will even redirect you to their own search engine when you attempt a search. NB: hijackers almost exclusively target Internet Explorer.
Toolbars plug into Internet Explorer and provide additional functionality such as search forms or pop-up blockers. The Google and Yahoo! toolbars are probably the most common legitimate examples, and malware toolbars often attempt to emulate their functionality and look. Malware toolbars almost always include characteristics of the other malware categories, which is usually what gets it classified as malware. Any toolbar that is installed through underhanded means falls into the category of malware.
Dialers are programs that set up your modem connection to connect to a 1-900 number. This provides the number's owner with revenue while leaving you with a large phone bill. There are some legitimate uses for dialers, such as for people who do not have access to credit cards. Most dialers, however, are installed quietly and attempt to do their dirty work without being detected.