Scareware is one of the most common forms of malicious software now. The whole idea is to scare you into giving up your money. It is very effective and very profitable. To date, most scareware makes you think you have a virus or spyware. It tries to annoy you to death so that you will pay a fee. If you do pay the fee, your credit card is charged once for the amount specified and then the program does absolutely nothing else. The whole idea behind these programs is to make quick easy money.
Now these scareware creators have a new tactic. The program downloads porn onto your computer and then asks you to pay a fee to clean up the porn images it found. And it then goes on to show you the porn images. The first of this new scareware tactic is called Win Spy Protect. True to the traditonal scareware, it then goes on the annoy you to death. Like a lot of scareware, it is uses something in its title to make it sound legit, in this case "Win" is used in the title.
This particular threat was actually from a hacked site, a children's website. It is important to note that most threats are designed to exploit unpatched Windows computers. An increasing number try to exploit unpatched Macs as well. If the malware or virus finds a computer which it cannot secretly get around the security of the system, it then tries to trick you into manually installing the program. If the user tells the computer to install a program, then no amount of security can protect from that. So always keep your computer up to date and never click on a banner ad which makes you think you have a virus.
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References:
AVG blog entry: How you can get porno'd without meaning to