How is it possible for spyware to survive hard-drive reformat, reinstall of windows and XP Home upgrade?

I had a complete rebuild done on my Compaq Presario that included all of the above. It has run for more than a month trouble free.
I have been nowhere but Yahoo answers and suddenly the old spyware starts showing up. Where did it hide, and how do I get rid of it? They installed AVG free software and it says no problem found.

It’s the work of satan! AARGH!

The TOP Windows XP Tricks & Secrets!!

Erector Spykee – The Spy Robot $299.99 Spykee, the spy robot, is a crafty ‘bot that you control via the WiFi connection in your computer. This means you can give Spykee commands from virtually anywhere in the world! Plus, he does just about everything except feed the dog.Spykee moves, watches, hears, speaks, takes pictures, records video and sound, and can act as a surveillance camera. What’s more – when he begins to lose steam, he aut…

Advanced System CD for Laptop -File Restore, Diagnostics & More for DELL, Compaq, HP, Acer, Lenovo, IBM, Toshiba $44.99 Looking for a disc that actually works, a disc that will boot your laptop and give you access to advanced tools and features when Windows is not booting correctly?The Advanced System Recovery disc has a suite of tools designed to work with any laptop including those from Dell, Compaq, HP, Lenovo, IBM, Acer, Nokia, Toshiba, and more. Simply insert the disc into your computer and restart it to acces…