New worm will cause you machine to infest others and reboot and repeat. It will not damage your data, but your PC will be unusable till it is fixed. The fix for this worm is not for novices.
Please go to http://windowsupdate.microsoft.com or the new site http://update.microsoft.com and get all the critical updates. I highly suggest that everyone no matter which version of Windows, to get the latest critical updates when they come out to prevent something like this. Also, you can turn on Automatic Update to alert you to new updates, or download then alert, or download, alert and auto-install.
CNN Got hit, and also you can see some of the inaccuracies. There are links here to the actual article about the patch at Microsoft. http://www.neowin.net/comments.php?id=29981&category=main
Also, Anti-Virus software can catch them most times. So please get one. There are some free ones listed here. I have heard good things about AVG one, which is on version 7 and this page needs updating in regards to the features and version numbers. http://www.computertalkshop.com/faq/free_av.htm Make sure auto-updating is enabled. AVG usually releases updates daily.
Spyware can be used to harvest info to steal your ID or steal from you:
Read about some cool changes to MSN Messenger, Spaces and Mail.