There is a dark side to the Internet these days in the form of Malware; Spyware, Viruses and Trojans. Some of the worst Trojans will download and install even more malware making the infection that much worse. The majority come either in email or as free downloads from the Internet. Trojans are programs that appear to be friendly until you install them. Some pose as Anti-Malware tools or screen savers.
In the old days, we'd always just reformat the drive of the infected system, but now a reformat can add up to a lot of wasted time.
There are several useful tools for cleaning an infected system. The first line of defense is a good anti-virus program. Most of the better ones have an auto protect feature that prevents viruses from doing any damage. Anti-Virus progams typically won't stop a Trojan so you need another tool for that. Some Trojans like Vundo require specific tools to remove them. You can often find them on the internet as free downloads from companies like Symantec and McAfee. Another method is to use a program like HijackThis that can scan and remove anything from your system. It does require a little more know-how on the part of the user. The rid your machine of spyware, you have more choices. The top three anti-spyware tools are Spybot Search & Destroy, AVG Anti-Spyware and Lavasoft's Adaware program. Most anti-virus makers are also including anti-spyware tools as part of the package.
After you have removed all the nasty stuff off of the infected machine you might still notice some oddities because some of the system files could have been damaged. The easiest way to repair this is to insert the Windows XP CD, click Star Run->CMD then type sfc /scannow. This will scan and repair any system files that were damaged by the malware. SFC is the "System File Checker" It has other options such as /scanonce which will do the scan on the next reboot.
You should also run windows updates after cleaning an infected system. The majority of the updates these days are security updates. They'll help prevent the system from getting infected again. Also, be sure to download the latest drivers for your hardware.