I meant to write that in all caps.
Q. "How can this happen"?
A. It's called SPOOFING.
Q. " and how can I stop it?"
A. You can't. It's just one reason why there is so much spam.
I will NOT post more about spoofing in this reply, but will tell you a few things.
1. Research SPOOFING on http://www.google.com if you really want to know what it is, but since knowing about it won't stop it, and since you have google, I hope you understand why I won't write one more word about it.
2. DO NOT OPEN, VIEW or PREVIEW any email that is junk. STOP DOING THAT. With all the exploits to Outlook and outlook express, people who open or even look at junk/spam/virus/other email are part of the problem. Don't be part of the problem.
Just viewing a spoofed email with some exploit can cause your machine to be infected (yeah, your antivirus will stop a 20 minute old virus?) and start emailing out the new bug.
Don't open such mail. Don't preview such mail. Don't inspect such mail...
Delete it and move on.
I get several returned mail messages every day and it is for messages that I am not sending. Someone is using my email address to send out tons of junk email. How can this happen and how can I stop it?