Favorite Free Software:

Portable Apps Suite std - portable apps don't need to be installed, they can run from a memory stick, the suite includes ClamWin Portable (antivirus),
Mozilla Firefox - Portable Edition (web browser),
Gaim Portable (instant messaging),
OpenOffice.org Portable (office suite),
Sudoku Portable (puzzle game),
Mozilla Sunbird - Portable Edition (calendar/task manager) and
Mozilla Thunderbird - Portable Edition (email client) and runs comfortably from a 512MB drive.
Internet Explorer 7 upgrade now but use Mozilla, some apps will open pages in IE
AVG anti-virus 7.5 -Free and since they mostly use the same .dat files...
AVG anti-spyware 7.5 -
MSN messenger 7 --more features than other messengers, not into MSN Live
M$Antispyware Beta - free but I'm liking AVG better
OpenOffice - Micro$oft Office replacement; WordProcessor, SpreadSheet etc.
Mozilla Firefox -- so far stopped 90% of pop-ups, spyware, Java Trojans....

for advanced users only:
Konfabulator - puts Widgets on your desktop, small downloadable apps
GIMP Portable - Photo and Image Editor
FileZilla Portable - the full-featured FTP client, supports resume failed downloads
VLC Media Player Portable - An easy to use media player that plays most audio and video formats
7-Zip Portable - File archiver and compressor
noip - find your home pc when you are away
OpenSSH - Secure shell & SFTP remote access
Tight VNC - remote control your home pc when you are away
ShortKeys lite - text replacement macros
Knoppix -Linix "live"=boots from a CD
Sharaza- use this to dl songs but NOT SOFTWARE! (virus carriers) & not movies (too big, just rent them)
Autoruns - see what gets run at startup
RootKitRevealer - some viruses install root kits
Sysinternals - Other good utils
grc.com - home of spin rite and shields-up
cmdtools - lots of cmd line utilities