I came across this Malware the other day, I claims to be installed by the Gardai Siochana (Irish Police) due to inappropriate content including pirated material and child pornography and demands a unlock code be purchased for 100 euros, god knows what actually happens to your credit card details.

I removed this easily enough by removing the Harddrive and running ESET virus scanner but it I could see how an inexperienced user could be panicked by this.