Scareware and scamware are terms that mean the same thing. They are a kind of PC malware that confuses or dupes users into buying the faked or artificial removal of alleged viruses, spyware, trojans and other assorted malware. In effect, it is like having your computer hijacked and then being forced to pay ransom money to get it back. In the past few years, scareware has become a rising and dangerous security menace to users in both the desktop and mobile computing environments.
Scareware consists of numerous forms of fake software with limited or no benefit which is purchased by consumers thru unethical selling practices. The sales approach is engineered to induce shock, anxiety, or the perception of a threat, directed against a trusting user. Many types of spyware and adware use scareware tactics as well.
An oft-used tactic calls for convincing users that a computer virus has infected their PC, then advising that them they download (aka buy) antivirus software to get rid of it. Commonly the virus is completely fictitious and the software is either totally non-functional or is itself malware. According to the Anti-Phishing Working Group, the amount of scareware software in circulation climbed from 2,850 to 9,287 in the last half of 2008. In the beginning half of 2009, the APWG discovered a 583% gain in the number of scareware programs in circulation. 
The term "scareware" can also mean any program or virus that tricks users and causes them to experience fear and panic. Another common name for them is “Rogue Security Software”.
How Scareware Spreads
Fake security software prays upon the trust of naive and gullible users. The name of the software and the polished look and feel of the download site is a social engineering tactic designed to defeat the security built into modern operating systems. Names like “AntiVirus 2009” and “WinDefender” sound like the legitimate security products put out by Norton and Microsoft.
The victim downloads the software believing that it will make his computer safer from Internet predators. Then as the software installs itself, the user will often willingly bypass and override the defenses of the system, unaware of what they are actually doing. I’ve actually done this myself a few years ago, so don’t feel too bad about yourself if you’ve done the same thing recently. Just take a lesson and learn to double-check BEFORE installing ANY new software on your system.
Most scamware/scareware programs include a Trojan horse component which users mistakenly install at the same time as the main program.
The Trojan may identify itself as being:
- A browser plug-in or extension (notably a toolbar)
- An image, screensaver or archive file attachment in an e-mail message
- A multimedia codec needed to play a certain video clip
- Software shared on peer-to-peer networks
- A free online malware scanning service
Other methods of infection are totally automatic, requiring no user activity to install. These ones take advantage of system security vulnerabilities so ALWAYS be suspicious of new websites and software even if someone you know refers you.
The following video produced by Fox channel 11 in January 2009, explains more about scareware and scamware and shows what really happens to people who fall prey to this predatory tactic.
In conclusion, just stay aware and never let your guard down when you’re on the Internet. If something looks fishy or too good to be true, stay away from it. Never be too anxious to download anything off the Internet and always check names of products and websites to make sure they truly are the real thing.