A couple night ago I heard about this on the news. I didn't think much of it until it happened to my sister-in-law yesterday. Here is how it works.
There are many ways a hacker can introduce malware or a virus into your computer. It doesn't have to be through a scam email that asks you to click on a bogus link. Sometimes it can simply happen by visiting a web site, which then embeds a cookie into your PC, and that cookie can be the trigger to send your PC to other web sites.
A pop up box appears on your screen. It may look like it belongs to your anti-virus software, it may look like it's from Microsoft, and what they all have in common is that they tell you to click here to fix your computer. Once you do, you are fucked.
My sister-in-law received a phone call yesterday from a woman claiming to be from Microsoft tech support. She said that they were notified that her computer had a virus and she could help her get rid of it. She was skeptical and said no thanks then hung up. She then walked over to her computer and the cursor was moving around by itself, accessing files and deleting everything. As she watched a box popped up and said "Will you talk with us now?". The phone rang again, this time it was a man. He wanted $500 to restore her computer and stop the attack. She hung up and called the police. They said there was nothing they could do. The man called back and said that he was in front of her house. My brother looked out front, nobody there. Now he's calling back threatening to kill her if she doesn't pay. Called the police again, they tried to trace the number but they said it's probably a stolen cell phone and can't be traced. Basically, they're fucked. The hacker has deleted everything from their PC, family pictures, important files, has the passwords to every web site they use, and has their home phone number. All they can do is either trash the computer or completely wipe it and hope no trace of the virus remains behind, and they must cancel all of their credit cards and change their home phone number.
I'll be the first to admit it, my sister-in-law is an idiot. She has her life out there on facebook which included here email address and phone number. This is probably why the hacker chose her in the first place because she wasn't careful about how public her information was.
I've heard some instances of people getting emails from Homeland Security or the FBI claiming that they have child porn on their computer and for a couple thousand bucks they will get rid of it for you. If you say no, they actually have the ability to place the illegal files on your computer and call law enforcement.
If you think your computer has been compromised or if there is an active attack happening while you are watching, un-plug it and shut down your network. If they can take over your PC they can also get access to other PC's on your home or business network and control them as well. Chances are they can also access your web cam and watch everything you do without your knowledge.
Be careful out there.