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Spyware

Most spyware is intended to spy on you monitoring your web Surfing habits or grabbing your keystrokes in order to steal your bank passwords or identity.

It is mostly propagated through web pages, file sharing programs and "free" utilities installed from the internet. Spyware is now detected, cleaned and prevented by most anti-virus software.

Malware

More recently the term malware attempts to define the entire class of malicious software. Malware (short for "malicious software") includes viruses, worms, Trojan horses, rootkits, spyware, adware, and other malicious and unwanted software.

The reason for the different term "malware" is based on the intent of the software. In the 90s and early 2000s the intent behind viruses, trojans, spyware, etc. was mostly a prank or for the simple notoriety of having authored something that infected a lot of computers. It wasn't long before people figured out that mass financial fraud could be committed using these techniques. This marks the birth of malware.

Malware is installed with the expressed purpose of committing fraud including identity theft, Bank fraud, cons, extortion sending spam or advertising fraud.

More background on Malware:

http://www.security-tech-reviews.com/types-of-malware.HTML

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