You'll get a ton of opinions on this one. Here's my opinion, based on a lot of experience with Windows 98, XP, Vista.
I don't feel like you need to pay money in order to find something that works. There are those who disagree, but that's what I've found.
ANTIVIRUS: I use
avast! on all my computers, and have done so for over half a year now. I like it very much in terms of it's real-time capabilities, security, customizability, low resource usage, constant automatic up-to-dateness, compatibility, and design.
If I had to choose a runner-up, it would be
AVG or
Avira.
SPYWARE: For real-time detection and removal, I prefer
Lavasoft Ad-Aware Anniversary Edition. I've used it for a few months with only good things to say. It isn't perfect, but most of the most obvious and annoying stuff it filters out well with few false positives.
As far as non-real-time antispyware programs, I'd recommend running
Spybot - Search & Destory and/or
Malwarebytes' Anti-Malware every once in awhile, or when needed.