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There is a lot of confusion these days as to the variations between Adware and Spyware. When you begin to add other forms of "wares" to the equation things can get even more complex. For instance, the word Malware just makes thing that much more perplexing. At the end of the day, the outcome is a lot of confusion and a little fear in regards to seeing anyone of those terms.
Example number one:
Imagine you download software off of the internet. A lot of the cases you can get software that is completely free. The only catch is that it is going to display advertisements whenever you use the software. This is how the software's maker is going to make their cash so they can afford to just give things free. Now whenever you launch the program you see little banner ads within the application, but otherwise the ads don't show up in any troublesome way.
Example number two:
In this example you'll download software from the internet. The software is free as in the preceding example. For all intents and functions things will appear identical. You are even notified very clearly that the ads will appear. The problem is that ads appear in ways you never actually expected. They arise even when you aren't using the software you downloaded and the ads become disturbing and bothersome.
Example number three:
Here is where you don't really mean to download any software at all. Or, you download something but aren't alerted in any way that you will be getting advertisements on your computer screen in any form. Still, ads start showing up whenever you use your computer. Sometimes you close them and they just come back. You try to stop them by uninstalling them however you can't make out any way to do it.
All of those instances deal with adware. It's software that is designed expressly to show advertisements on your screen. Inherently there is nothing actually wrong with this and as stated in the first example it's often something that you agree to. Regrettably, as with the second example, it's often something that provides more than was agreed.
The latter two examples mean what is known as malware. Adware is not always malware and vice versa, but the two are often packaged together. Malware is essentially software that works on your computer in a malicious manner. In some cases, as with the second example, it is simply a nuisance, but in other positions it can actually bring about a lot of destruction.
As for spyware, well, that can actually exist in any one of the above examples. Spyware is any type of software that traces things that you do on your computer. For the most part it is malicious. That said, in some cases the kind of software stated in the first example will explicitly express that it uses spyware, while it will say so with softer words.
In its less harmful incarnation, spyware simply watches what you do in terms of websites you hit. It then uses that information to send you the most appropriate ads. In its more detrimental incarnations spyware can track more personal details than that, and can even send crooks information about your passwords etc.
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