I have heard that internet abusers can latch onto your computer and
use your phone to run up huge telephone bills. Could anybody elaborate
on this, how it is done and mainly how to protect yourself against
this?
My computer is a pentium with win98

http://www.emsisoft.com/en/kb/articles/tec041212/
from a search for:  phone dialer premium.

Your phone provider might arrange if you ask them that your line
cannot be used to call premium overseas numbers.  Other than that you
can unplug the modem when not in use and use general computer security
measures.

I mean to say "premium OR overseas numbers".

vaac, dialers are a form of spyware because of the way implant
themselves on your computer.  Bozo99 provided a nice link.

Here are 2 tried and true and free anti-spyware programs. Just like
anti-virus software, they too need to be kept current so they
recognize new threats, or variants of older ones.  They use signature
files that hold markers of known spyware threats.

From within the tool but Before a scan you check for updates. The tool
will compare your sig file against what they have out on their Server.
If the Server has a newer sig file it will be downloaded. Run scan.
You should run the scan at least once a week.    
Viruses get a lot of media coverage but spyware has emerged as a more
insidious threat from organized criminal entities.


Adaware SE v1.06 from Lavasoft.  Lavasoft also makes 2 premium (paid)
versions  of Adaware but you can start off with free one.

http://www.lavasoftusa.com/
It will, if you choose, provide a link to download dot com but I am
not sure if this hiperlink will work.

http://www.download.com/3000-2144-10045910.html?part=69274&subj=dlpage&tag=button

Spybot is also one of the original and free tools.
http://www.safer-networking.org/en/index.html

And Microsoft  has been forced to enter the anti-spyware space. They
have a beta (test or pre-release) version on their site. Also free.

http://www.microsoft.com/athome/security/spyware/software/default.mspx

I have shied away from it because it is still a "beta" and for another
reason but a friend who tried it on Windows XP said it was very good.

If you use DSL or broadband then your computer uses a thick ethernet
RJ-45 plug and is probably *not* connected to a  "normal" RJ-11 phone
jack.
That makes you somewhat immune to dialers because Dialers need the
RJ-11 so that they can use the old-style beep tones (like a fax) to
physically dial the long distance number.