Strictly defined, Computer Spyware consists of computer software that gathers and reports information about a computer user without the user's knowledge or consent. More broadly, the term spyware can refer to a wide range of related malware products which fall outside the strict definition of spyware. These products perform many different functions, including the delivery of un-requested advertising (pop-up ads in particular), harvesting private information, re-routing page requests to illegally claim commercial site referral fees, and installing stealth phone dialers. 
Spyware as a category overlaps with adware. The more unethical forms of adware tend to coalesce with spyware. Malware uses spyware for explicitly illegal purposes. Exceptionally, many web browser toolbars may count as spyware. On the other hand, adware may simply load ads from a server and display them while a user runs a program, with the user's permission; the software developer gets ad revenue, and the user gets to use the program free of charge. In these cases, adware may function ethically. If the software collects personal information without the user's permission (a list of websites visited, for example, or a log of keystrokes), it may become spyware.

Data collecting programs installed with the user's knowledge do not, technically speaking, constitute spyware, provided the user fully understands what data they collect and with whom they share it. However, a growing number of legitimate software titles install secondary programs to collect data or distribute advertisement content without properly informing the user about the real nature of those programs. These barnacles can drastically impair system performance, and frequently abuse network resources. In addition to slowing down throughput, they often have design features making them difficult or impossible to remove from the system.

The first recorded use of the term spyware occurred on October 16, 1995, in a Usenet post that poked fun at Microsoft's business model. Spyware later came to refer to espionage equipment such as tiny cameras. However, in 1999 Zone Labs used the term when they made a press release for the Zone Alarm Personal Firewall. Since then, computer users have used the term in its current sense. 1999 also saw the introduction of the first popular freeware program to include built-in spyware: a humorous and popular game called "Elf Bowling" spread across the Internet in November of 1999, and many users learned with surprise that the program actually transmitted user information back to the game's creator, N-soft. For many Internet users, "Elf Bowling" provided their first experience with spyware.

In 2000, Steve Gibson of Gibson Research released the first ever anti-spyware program, Opt out, in response to the growth of spyware, and many more software antidotes have appeared since then. More recently Microsoft has released an anti-spyware program and the International Charter now offers software developers a Spyware-Free Certification program.

According to a study by the National Cyber-Security Alliance, spyware has affected 90% of home PCs.