Yes, that is malware.
(Even though this point may seem random, just in random passing I thought I'd mention it: the best thing to do in all situations is if something is warning you of spyware, and it isnt a program you installed, or if something is offering you an URGENT and FREE scan then say eff you to it.)
AVG is a very good program, but do you have anything such as Spybot S&D, or CounterSpy? These are all good programs, as well as OutPost Firewall, which keeps a tight eye on the things coming and going from your network. Although I usually am very stuck to AVG antispyware 7.5, I discovered Counterspy, which in addiction to scanning also monitors execution of potentially harmful programs.
Spybot also monitors changes in the registry as well as scanning.
Files in quarantine are safe and cannot harm your computer.
Also, don't be afraid to try and manually delete malware if your scanner is having a hard time with it, to see firsthand what error messages you might get, which give a very good indication of why it can't be deleted, at that time. If your scanner gives you the exact file and path, to the system file or registry key, then you needn't worry about ****ing anything up by deleting something you shouldnt have, because you will only be deleting that malware file or folder.
After you install one or more of these programs (spybot can be used with any other scanning software, but using more than one antivirus at a time could cause conflicts) get all updates, then restart your pc in safe mode, and do a huge scan. Make sure you disconnect your internet while you do this, because some malware can contact its server to say 'hey, im being deleted, replace me'.
The reason why you want to go into safe mode is because in normal startup certain malware cannot be removed because they are constantly 'in use' by some unknown source. In safe mode the system is loaded with minimal drivers and no startup programs, etc, which almost guarantees the file will not be in use.
Let me know how that goes. =)
~BlackScarletLove~
