Wow. What an interesting read. Even though I've never really been hacked, just gotten a few Windows viruses in the past, I am extremely suspicious about virtually anything that deals with the web. You never know when something like this could happen.
A few weeks ago, it was late at night, and I stupidly downloaded a file that allows you to generate hotfile premium accounts. Usually things like this, or the famous "Your computer may be infected" with the Windows XP theme, are obvious clues leading to malware. This is why I switched to a Mac though since you can't really get a virus. It's funny though when you get a message like the "Your computer may be infected" with the XP theme in your web browser on a Mac, because you know for sure how fake it is.
Anyways, back to my encounter a few weeks ago on my Windows 7 partition. So basically I downloaded this app thing, which also had a .txt file attached. I opened it up, and it was like thousands of asterisks like this "********" with carriage returns every 20 lines or so. Once I opened it though, my antivirus agent detected the Trojan and removed it. Thankfully nothing was executed before. I just can't believe I didn't see it coming that the asterisks like "****" mean the code is encrypted! And I just took a CSC 101 class where we did Cyphers and encryption toward the end. Well I just learned something new. Thanks.
It's also nice to see how far Win 7 has come from XP. On XP I would get viruses, but it wouldn't be very frequently. On Win 7, I feel much more secure, but not as secure as Mac. LOL.
Anyways, I just wanted to say thanks to the OP for posting this, and to everyone that contributed, because even someone like me learned a lot of useful things I never would have thought of before.