The blue screen "Spyware threat detected virus"?

A blue screen takes over my Desktop background displaying:

--------------------------------------...

Warning! Spyware threat detected on your PC

Your computer has several fatal errors due to spyware activity.

Your IP address is 59.93.255.113 and via this address an unauthorized access was gained by another computer. It is strictly recommended to install an antispy software to close all security breaches.

--------------------------------------...

Evenif I reset the background, after some time it is coming back again. Also a pop-up window is coming with a link to some anti-spyware downlload sites. Initially the internet was not connecting. I got to connect to internet after running WinsockxpFix. What should I do now for getting rid of this irritating problem. I have AVG antivirus (with full updates) running on my PC. Any help will be appreciated.

The blue screen "Spyware threat detected virus"?free spyware

Is the advertising that it is try to sell you one of these useless products? It is scam advertising trying to swindle you. A computer infection called smitfraud is causing the phony warnings (see below).

AdwarePunisher,

AdwareSheriff,

AlphaCleaner,

Antispyware Soldier,

AntiVermeans,

AntiVermins,

AntiVerminser,

AntivirusGolden,

AVGold,

BraveSentry,