Spyware explained, as simply as possible: All that supposedly 'free' software you can get ahold of (realplayer, cuteftp, audiogalaxy satellite, etc, etc) is free for a reason. They have built in sniffers that report usage data of your computer to the publisher that they then sell to marketing people. Of course the end user is never enlightened as to this fact whenever it can be avoided.
Yet another reason to go with opensource.