Example number one:
Imagine you download software off of the internet. A lot of the times you can get software that is completely free. The only catch is that it is going to show advertisements whenever you use the application. This is how the software's maker is going to make their cash so they can afford to just give things away. Now whenever you open the program you see little poster ads within the application, but otherwise the ads don't show up in any bothersome way.
Example number two:
In this example you'll download software from the net. The software is free as in the last example. For all intents and functions things will appear identical. You are even notified quite clearly that the ads will come out. The problem is that ads are seen in ways you never actually expected. They pop up even when you aren't using the software you downloaded and the ads happen to be intrusive 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 notified in any way that you will be shown advertisements on your monitor in any form. Still, ads start appearing whenever you use your computer. Sometimes you close them and they just come back. You try to get rid of them by uninstalling them however you can't make out any way to do it.
All of those examples deal with adware. It's software that is developed expressly to show ads on your screen. Inherently there is nothing actually wrong with this and as seen in the first example it's often something that you agree to. Unfortunately, as with the second example, it's often something that provides more than was agreed.
The latter two examples involve what is referred as malware. Adware is not always malware and vice versa, but the two are often packaged together. Malware is essentially software that operates on your computer in a malicious manner. In some situations, as with the second example, it is merely a nuisance, but in other positions it can actually bring about a lot of damage.
As for spyware, well, that can in fact exist in any one of the above examples. Spyware is any type of software that tracks things that you do on your computer. For the most portion it is malicious. That said, in some cases the type of software stated in the first example will explicitly express that it uses spyware, though it will say so with softer language.
In its less harmful incarnation, spyware simply watches what you do in terms of websites you visit. It then uses that information to send you the most suitable ads. In its more harmful incarnations spyware can track more personal details than that, and can even send crooks information about your passwords etc.
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