In the famous myth about the defeat of the impenetrable city of Troy, the invading Greeks created a giant horse as a gift to trick the Trojans into letting it through their defenses. Once inside, 30 warriors jumped out of the horse and opened the city gates to the invading army. 
Much like their ancient namesake, modern Trojan horses are software threats disguised within a harmless-looking file or program in order to trick you into letting them past your defenses.
When you open a program, e-mail, or document with a Trojan horse in it, the program may change your computer settings, modify or delete files, or secretly create a back door through your security so that the hacker can gain access to your computer at will.
Unlike many other threats such as Viruses and Worms, Trojan Horses can not run themselves. They must rely on a user to run them and infect the computer. Because of this, they are socially engineered to make you want to open the file and inadvertently infect your computer.
The most common ways to be infected by a Trojan Horse are:
There are several steps you can take to prevent infection by Trojan Horses...
Buy and run a Trojan scanner and an antivirus program
If you run monitoring software in the background on your machine, this will help keep Windows Trojans away. It cannot protect you completely, but it will at least help reduce the problem.
Avoid Peer-To-Peer (P2P) filesharing networks
Networks like Kazaa, Limewire, BearShare and E-mule are a hotbed for Trojan horses because they are ideal for transferring infections. A hacker or identity thief simply infects a popular file or program and lets the infection spread.
Avoid opening e-mails or chain letters from untrusted sources
When you receive an e-mail from a source you do not know and trust, do not open it. Chain letters with file attachments, pose a high likelihood of infection by a Trojan Horse. Chains are one of the most popular social engineering tactics hackers use to trick recipients into opening their infected files.
Install a good firewall
A program such as ZoneAlarm, Norton Personal Firewall, or McAfee Firewall can provide an added level of protection to your machine. It can prevent many Trojan Horses from establishing connections to the internet, so even if your system is infected, the threat is rendered harmless because it cannot communicate with its creator. The downside is that some modern threats are designed specifically to disable or go around such widely used protection programs.
Unfortunately there is no way to completely protect a Windows PC from Trojan Horses. The threats are constantly evolving and the protection software is forced to catch up, so it is always a step behind.
It is possible to avoid this problem using a Hosted Online Desktop (also known as a Virtual PC) for your online activities.
Hosted Online Desktops are very effective because they provide a sterile working environment which can be fully protected so you do need to worry about security.
Other common online threats are Viruses, Worms, and Keyloggers