Computer viruses behave much like biological viruses. That's how they got their name. Viruses "infect" executable (program) files. When those files are then "run" (started) the virus also runs. They then infect more files and do other damage. The infection continues to grow. Pretty soon the computer is sick as a dog.
If one of these files gets transmitted to another computer, for example by email attachment, and if the file is opened, the other computer will be infected too. Sounds like a cold or the flu to me. In fact, the same math used to analyze the spread of biological viruses has been used to model the spread of computer viruses.
Most viruses are designed to vandalize computers and data, or simply mark them with graffiti. Their objective is damage for fun or revenge. Infected floppy disks used to be the main vector for viruses. Now they arrive in email attachments, downloaded files, or as part of certain worms.
Worms are similar to viruses. They are more advanced. They are like bacteria. :-) The main difference is that they install their own file(s). They do not infect other files. They don't multiply within the computer either. They multiply by sending multiple copies of themselves to other computers. In other words, they multiple within a network. The network can be an intranet within an organization, the Internet, or both.
Worms move through the network in one of two ways. The classic strain arrives as email attachments. When a victim opens an attachment the worm goes to work mailing out copies of itself. It uses the addresses it finds in address books and email messages on that computer.
A newer strain -- called network worms -- operates like automated hackers. Infected computers scan the Internet for more computers like themselves -- computers that are vulnerable to invasion by the worm. When they find one, they inject a copy of the worm. The cycle repeats and the population explosion begins. Unpatched computers, or those without a firewall are the ones that are vulnerable.
Worms can be used to vandalize or mark with graffiti. The objective is more often larceny these days. Worm writers have learned that crime pays. They may scan for personal information, inject spyware, or install a Trojan horse. The result is compromise of your financial details, or even worse, theft of your identity.
You once needed only an anti-virus program for protection from pests. "Virus" is often used today as a catch-all to mean viruses, worms, spyware, Trojans -- any kind of malware. These vermin aren't all the same. Anti-virus programs only protect against some strains of malware. Also anti-virus programs do not scan for spyware and other malware that is already installed. You need broad spectrum anti-malware to complete your protection package.
In addition, it's easy for a virus writer to spoof anti-virus software. All he needs to do is release trivial variants of the virus. It can be several days before anti-virus companies catch up. Anti-virus programs are more like a parachute than a safe landing. Knowing what not to click is more important, but you need the anti-virus in case you slip up.
Most, but not all viruses and worms can be removed by anti-virus programs. You can get good information free tools for removing the more "popular" ones at several anti-virus companies. It may be best to seek the help of a local expert though.
If you're running Windows ME or XP and remove a virus, do not subsequently use a system restore point that might have included the virus, or you may need to remove it again.