A Trojan horse is a special kind of malicious software (malware) that can carry out many unwanted thing after infecting a computer.

Trojan horses do not replicate (reproduce), unlike viruses and computer worms.

A Trojan horse consists of two parts, a server and a client.

Server is the part of a Trojan horse that infects a computer and client is the part that sits on the computer of the malicious person that uses the Trojan horse.

The server part is controlled by client through the Internet.

Trojans horses are computer files that are pretended to be amusing softwares like games or some useful computer programs, but are indeed malicious programs in nature.

After infecting the computer, server tries to connect to client every time the computer connects to the Internet.

The person using the client could do many thing on infected computer after connecting to the server, based on what the Trojan horse has been programmed to do, like taking control of the infected computer and doing many unwanted thing subsequently, for instance deleting files and formatting the hard disk.

Some Trojan horses are keylogger, that means they can log keystrokes of the computer keyboard in a computer file and subsequently send it through the Internet to related parties or persons, that leads to theft of the information.

The information stolen could contain very sensitive things like usernames and passwords or credit card information.

Precautions to be taken:

1. Never accept computer files from those whom you do not know, even be very careful when getting files from persons you know, as they could unknowingly pass on a malicious software. Even non-executive computer files (files that are not capable of doing anything on a computer when run) can be bound to executive files through special programs named "exe binders" to create "double extension" files. An example of a double extension file could be something like picture.jpg.exe. In this case it is a picture file bound to an "exe" file that could contain a malicious software.
2. Always use a reliable firewall and antivirus installed on your computer. Your antivirus must always work in active mode to automatically scan all files you receive. A reliable firewall is capable of preventing the Trojan horse from connecting the Internet by blocking it.