ok, this is a long process. jibberjabber has some really good recommendations. Try searchbot seek and destroy and hijack this as well. both can be obtained from download.com or a google search. This will help eliminate spyware. Sometimes the only way to remove a virus is indeed to reformat but you do want to try and backup any important data first.
If you have an HP or Compaq that is 2 years old or newer you can press F12 when the computer firts starts and the screen is black with some info in white text. This will ask you if you are sure you want to proceed, all data will be lost, yada yada yada, say yes and away you go. Less then 20 minutes and you'll be up and running again just like it was out of the box. Any additional software you will have to install once again unfortunately.
Now if you don't have an HP or Compaq or you have an older model you need to do the following:
Take your Windows XP CD (you are using Xp I hope right?) and place it into the cd-rom drive and reboot your computer. The CD should boot to a menu that will allow you to choose to re-install windows during which you can erase (format) all the data on the hard drive. Windows will then re-install and you'll be good to go. You need a valid disc because you will need a cd-key to complete installation.
Also, all 3rd party software will have to be re-installed once again. Make sure you have the latest updates from Windows and that you are running at least Service Pack 2 for Windows XP.
It's a little different if you aren't using Xp so hopefully you are. If not let me know and I can guide you through that fun process as well. :-)
If all else fails do a google search on reinstalling windows xp and I'm sure you'll find a lot of help that way as well!
lots of experience