My best guess would be that since the problem is rather sudden, that it's a result of some kind of malware. Someone else can cover the removal aspect of things, I like to focus on preventing the problems before they start.
To that end, some very important lessons in computer security that you need to learn. The first one is, Microsoft products are NOT safe to use for any period of time on the Internet. There are a whole host of reasons why, but that's what it all amounts to. I keep hoping some day this will change, but Microsoft continues to disappoint.
Internet Explorer and Outlook/Outlook Express are chief among those programs that should NEVER be allowed to connect to the Internet. There is one exception, and that's using Internet Explorer to download security patches from Windows Update. Outside of that, you'd be best to pretend it doesn't exist. Choose your favorite among the alternative browsers Mozilla Firefox, Seamonkey, Opera, and Safari. Make that your new browser of choice. Almost any other email client would be an improvement, security wise, over Outlook/Outlook Express as well. There are dozens, if not hundreds, to choose from.
Another important thing to note... NEVER, and there are no exceptions to this one, NEVER click on a link in an email message. It doesn't matter from whom it came, never ever click on a link in an email message. Always highlight the URL, then copy and paste it into your web browser for further inspection. There are all kinds of little tricks you can use to make a link in an email message look like it's doing one thing when it's really doing something else. If you see "http://" anywhere in the URL text besides the very beginning, don't follow the link. It doesn't matter who appears to have sent the message. It could be faked, it could be the result of an email worm, it could have been altered en route, etc.
The following are some additional tips. Some I've already mentioned, but I just copy and paste this bit from a file I have so I don't have to type it out every time.
These are only suggestions, but the more you follow the better your odds of avoiding problems will be.
1) Avoid using Internet Explorer as much as possible
1a) Use Mozilla Firefox, Seamonkey, Safari, or Opera
2) Be sure to always install security updates for Windows
2a) One and only time it's safe to ignore #1
3) Firewalls are important
3a) XP's firewall is good enough, but feel free to use a third party one
4) Anti-Virus programs are important
4a) If you need a free AV program, try AVG Free and Avast
5) Avoid using any pirated programs
6) Avoid using any file sharing (P2P) programs
7) Avoid using Outlook or Outlook Express
7a) I would recommend Mozilla Thunderbird or web based email such as Gmail
Just remember these tips won't help you cleaning up the mess you already have, they only help prevent the problem from reoccurring. Someone will likely be along shortly, if not already, to deal with the cleaning up aspect of things. I've been following those guidelines of mine on my own system for so long now, and haven't had any problems since starting, that I've forgotten most of what I know about fixing these sorts of problems.