|Your best protection is common sense. Don't download/open files from unknown or suspicious sources (such as unsolicited emails, porn sites, software crack sites, etc.). Also be careful where you type in passwords/other sensitive info. For example, ensure you really are at "paypal.com" and not "paypal.hacker.com"|
From a software perspective, you should have an antivirus product installed. Recommendations vary across the web, but I personally use AVG Free. Popular anti-malware programs such as SpyBot or Ad-Aware will find and remove spyware and also can monitor your computer real-time for new threats. A good anti virus and antimalware program will keep your identity protected in most cases, The only time they won't help is if you deliberately give out your private information to a spoofed website. Again, preventing this is mostly common sense, but also ensuring you have the latest version of your web browser helps. Finally, make sure you ahve all the latest Windows updates isntalled.
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