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1. How did this start? I see references to KaZaa and other servcies that are not used by my boss.
2. How does this not fit the definition of "virus"?
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Internet explorer has many holes to let stuff like that through. Let's say that you go to a web site, and the web site runs and ActiveX control (a small script) that installs the little spyware program on your computer (yes, IE holes do just that). That's how it might have started....or Kazaa, or any other program from Microsoft....Outlook, etc.
2 I think a virus by definition is destructive, and all spyware/'adware does is a pop up advertisements...so in a legal POV this is not a virus. Of course personally I do consider anything that runs without your permission a virus....but this is just a non destructive type of a virus.