Spyware Versus Viruses
Viruses are programs that manage to replicate themselves from computer to computer. Originally they were passed through the common use of floppies. As networks became more common, virus writers tested their skills by creating viruses that could pass over the wire from one computer to another. With the advent of the Internet, always-on broadband and active X controls for Internet Explorer, however, you could imagine roving bands of programs "hopping" from computer to computer and you would not be far wrong. Some people have reported virus infections within two minutes of connecting a computer to the Internet, long before their service patches downloaded or their antivirus programs were updated.
Spyware is more interested in what a user is doing; thus the name "spyware." Certainly there is a common middle ground where viruses can spread keyloggers ( yes, that's exactly what it sounds like ) or other malware. But more commonly, spyware is unknowingly installed by the user and it comes along with another program, much like a remora accompanies a whale. Just like spies in the Tom Clancy novels, spyware generally reports to a master server somewhere.
Both spyware and viruses eat up your computer's resources, and both need to be removed from your system. However, the approach for each one is different, and you would currently use two different programs to remove these programs.