First off, let me stress that in my humble opinion, you need a collection of programs to protect your computer - there is no one-size-fits-all software.
That being said, considering the list of programs I'm about to provide, you might be surprised that I don't include an anti-virus program. I don't use anti-virus software and I haven't used it for 95% of the 15 years I've been online. I did use AVG when I first got broadband but I dumped it soon after because it slowed down my machine and it served me no purpose. The trick to avoiding catching is a virus is: Don't Open Strange Email Attachments. Turn off the preview pane in your email client software and set it text-only view format. In addition, these days, most email clients bundle a virus-checker so when you do get sent an attachment, odds are you'll know if it's infected before you try to open it.
Now, on to my battery of protection tools - all free. Note that many of them come from the site:
http://www.321download.com/LastFreeware">Last Freeware. That's because I'm cheap and I refuse to pay for newer versions that are no more effective.
Kerio Personal Firewall - A very simple, lite firewall. Install it, reboot your machine and when you open programs that need online access, the program asks you what you want to do: Permit or Deny?
http://www.321download.com/LastFreeware/page7.html#Kerio%20Personal%20FirewallX-Setup - This is a behind-the-scenes Windows tweaker. I use it mostly to disable stupid auto-enabled startup programs that piss me off like Adobe Reader's updater thingy. You can also use it to Set Windows Registration Done, change your OS user name and all kinds of nifty stuff.
http://www.321download.com/LastFreeware/page5.html#X-SetupWinPatrol - This program is adorable. It puts a little Scotty dog icon in your system tray and he "woofs" when websites or auto-intalls baddies try to mess with your Registry/Startup files. You can also disable auto-run startup stuff with it.
http://www.winpatrol.com/download.htmlSpywareBlaster - I love this program. It blocks spyware from a regularly updated database of known spyware sites. You open it up, get your security updates, enable protection and close the program - no having to run it all the time because it works without being "on". When you install it make sure to choose the Manual Update option and that way you don't have to pay for it. Just remember to go get your updates on a regular basis.
http://www.javacoolsoftware.com/spywareblaster.htmlHiJackThis - This software scans for obnoxious stuff that get's installed with new software like stupid toolbars and stuff. Those things are called Browser Helper Objects (BHOs) - With HijackThis, you get rid of them.
http://free.antivirus.com/hijackthis/TypeItIn - This software is supposed to be a form-filler-outer thingy. I use it for my passwords. I never ever let my browser store my passwords for me - ever. Instead, I make little buttons for each of my passwords with TypeItIn and when I need to supply a password, I fire it up and click a button. Remember to untick the "update" button during install so you won't have to pay for the new version.
http://www.321download.com/LastFreeware/page5.html#TypeItInThat's my armory of protection stuff. Like canetoad, I also use the NoScript and AdBlock plugins with my Firefox.
:)