The symptoms you describe seem
like it is a member of the Anti Virus Soft family.
start the computer in safe mode with net working.
open internet explorer.
click on the Tools menu and then select Internet Options
Now click on the Connections tab
Now click on the Lan Settings button
Under the Proxy Server section,
uncheck the checkbox labeled Use a proxy server for your LAN.
Then press the OK button to close this screen.
Then press the OK button to close the Internet Options screen.
Now that you have disabled the proxy server
you should be able to browse the web again with Internet Explorer.
COME BACK TO HERE (on the infected computer).
the .exe file associations are going to be destroyed so
download this first you will need it later.
Fix .exe : http://download.bleepingcomputer.com/reg/antivirus-vista-2010/FixExe.reg
Now
get malwarebytes here,
this is a direct download link
so you should have no trouble getting it.
click on this link ↓ and then select run.
http://www.malwarebytes.org/affiliates/2-spyware/mbam-setup.exe
INSTALL IT TO YOUR DESKTOP, update it,
then run a full scan and remove everything it finds.
Now run the Fix .exe you downloaded earlier.
Now do this online scan.
to make sure you have nothing else hiding away.
http://www.eset.com/onlinescan/
preferably still in safe mode with networking.
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How to Start Computer in Safe Mode with Networking.
1. During BootUp process Press F8 continuously until selection appears.
2. Use Arrow Up+Down to select SafeMode with Networking on the selections menu.
3. Hit Enter to proceed.
.