There is a large amount of chaos these days as to the differences between Adware and Spyware. When you set to attach other forms of "wares" to the equation things can get even more complex. For instance, the term Malware just makes thing that much more perplexing. At the end of the day, the effect is a lot of confusion and a little fear in regards to seeing anyone of those terminology.
Example number one:
Imagine you download software application off of the internet. A lot of the times you can get software that is totally free. The only catch is that it is going to exhibit advertisements whenever you use the software. This is how the software's developer is going to make their cash so they can afford to just give things for free. Now whenever you launch the program you see little sign ads within the application, but except that the ads don't show up in any bothersome way.
Example number two:
In this instance you'll download software from the web. The software is free as in the preceding example. For all intents and uses things will appear identical. You are even notified rather clearly that the ads will appear. The problem is that ads turn up in ways you never actually guessed. They pop up even when you aren't utilizing the software you downloaded and the ads turn out to be disturbing and bothersome.
Example number three:
Here is where you don't actually mean to download any software at all. Or, you download something but aren't informed in any way that you will be getting advertisements on your display in any form. Even then, ads start appearing whenever you use your PC. Sometimes you exit out of them and they just come back. You try to stop them by uninstalling them but you can't make out any way to do it.
All of those cases deal with adware. It's software that is designed expressly to show banners on your screen. Inherently there is nothing in fact wrong with this and as seen in the first example it's always something that you accept. Regrettably, as with the second example, it's often something that brings more than was agreed.
The latter two examples involve what is known as malware. Adware is not always malware and vice versa, but the two are often bundled together. Malware is basically software that operates on your computer in a dreadful manner. In some instances, as with the second example, it is simply a nuisance, but in other circumstances it can actually bring about a lot of damage.
As for spyware, well, that can actually exist in any one of the above mentioned examples. Spyware is any kind of software that tracks things that you do on your system. For the most chunk it is malicious. That said, in some cases the kind of software said in the first example will explicitly express that it uses spyware, although it will say so with softer words.
In its less harmful manifestation, spyware simply observes what you do in terms of websites you visit. It then uses that particulars to send you the most apt ads. In its more detrimental incarnations spyware can track more personal information than that, and can even send crooks information about your passwords etc.
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