You may have caught a worm!
This thing is called the "Kido Worm" , "Downadup" and "Conficker." It began in Oct. 2008 but in December it evolved into a Superworm. Its ability to thwart any attempt to delete it and to spread via USB devices is confounding.
There is a lot of info out there if you Google these names. It is an interesting Worm as it seems to disable every defense before the victim can even launch a counter attack. It disables system restore, shuts off Microsoft updates, blocks Antivirus updates, hijacks the browser (Safari, Explorer, Chrome and Firefox) and finally it downloads more malicious software as it goes. It is impossible to give one set of instructions to remove the Virus as it is different on every machine.
The latest variant of the worm now lets it spread via thumb drives. It operates by copying itself in a random folder created inside the Recycler directory, which is used by the Recycle Bin to store deleted files, and creating an autorun.inf file in the root folder. The worm executes automatically if the Autorun feature is enabled.
Certain TCP functions are also patched to block access to security-related Web sites by filtering every address that contains certain strings. This makes it harder to remove because information about it is difficult to gather from an infected computer. Additionally, the sneaky little worm removes all access rights of the user, except execute and directory usage, to protect its file. Microsoft has created a removal tool for this worm, but if you are infected you must find an uninfected computer to download Microsoft's Malicious Software Removal Tool.
See the following link: http://www.microsoft.com/protect/computer/viruses/worms/conficker.mspx
If you have the Kido/Conficker worm you will no be able to link to the above link.
"If your computer is infected with the Conficker worm, you might be unable to download certain security products, such as the Microsoft Malicious Software Removal Tool or to access certain Web sites, such as Microsoft Update. If you can't access those tools, try using the Windows Live OneCare Safety Scanner. If that doesn't work, read the following Microsoft Help and Support articles on an uninfected computer. "
My advise is to get the removal tool on a brand new/clean USB device from another computer and then load it onto your computer. The surprising thing is that this thing started in Oct. and already has infected 12.9 million computers. Microsoft has offered a 250K reward to help catch the culprits that created this worm.
Hope this helps,