Ransomware is a form of malware in which rogue software code effectively holds a user's computer hostage until a "ransom" fee is paid. Ransomware often infiltrates a PC as a computer worm or Trojan horse that takes advantage of open security vulnerabilities. Most ransomware attacks are the result of clicking on an infected email attachment or visiting hacked or malicious websites.
Upon compromising a computer, ransomware will typically either lock a user's system or encrypt files on the computer and then demand payment before the system or files will be restored.
Also see The Difference Between a Virus, Worm and Trojan Horse and Rogue Anti-Virus Software Explained in the Did You Know? section of Webopedia.
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