Malware (for "malicious software") is any software used or created by hackers to disrupt computer operation, gather sensitive information, or gain access to private computer systems. It include computer viruses, worms, trojan horses, spyware, rootkits and other malicious programs.
For more info, please visit: http://en.wikipedia.org/wiki/Malware
It is accomplished by either compromised FTP accounts or via exploited code on your website (SQL injections, file upload, etc.).