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(n.) (1) Adware is the common name used to describe software that is given to the user with advertisements embedded in the application. Adware is considered a legitimate alternative offered to consumers who do not wish to pay for software. There are many ad-supported programs, games or utilities that are distributed as adware (or freeware).  Today we have a growing number of software developers who offer their goods as "sponsored" freeware (adware) until you pay to register. If you're using legitimate adware, when you stop running the software, the ads should disappear, and you always have the option of disabling the ads by purchasing a registration key.

(2) Another use of the phrase adware is to describe a form of spyware that collects information about the user in order to display advertisements in the Web browser. Unfortunately, some applications that contain adware track your Internet surfing habits in order to serve ads related to you. When the adware becomes intrusive like this, then we move it into the spyware category and it then becomes something you should avoid for privacy and security reasons.

See The Difference Between Adware & Spyware in the Did You Know...? section of Webopedia.
Also see Webopedia's "All About Software" article.

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