After the purchase of Giant Software (http://www.giantcompany.com/) Microsoft have released a free public Beta of their AntiSpyware software. I have been running it on a couple of machines and even though it is Beta, it seems pretty stable, and certainly worthwhile if you don't already have spyware protection (with the usual caveats regarding Beta software of course)
You can get it here: http://www.microsoft.com/athome/security/spyware/software/default.mspx
Microsoft also bought GeCAD last year (http://www.microsoft.com/presspass/press/2003/jun03/06-10GeCadPR.asp), who build anti-virus software, so they are obviously moving into this market. Whether the antivirus/antispyware products will be rolled into one product, and then released bundled with Windows, or charged separately is not confirmed yet...