This recent update/upgrade v8.0.196 may be playing havoc.

A recent update of AVG's antivirus software knocked out some people's Internet connection. AVG's support page indicates that after upgrading to AVG version 8.0.196, your network link may fail.

1. Reboot first
2. If this doesn't solve the issue follow the instructions on AVG's support page to download the fixfiles.zip file to your computer and Save to desktop. Double-click the .zip file to open it, and then double-click fixfiles.exe in the resulting folder to run the utility.
3. If the glitch persists, the company recommends that you run a repair installation of your AVG app.
4. If reinstalling your antivirus software doesn't get you back online, AVG advises that you contact the company's support desk for further instructions.

http://www.avg.com/support#tba1

(Source: Windows Secrets)
I am posting this here, and on the Windows OS and Security forums as the problem may show up on any if these.