Unfortunately, the program script changes so it gets through virus and spyware protection programs -- I had both on my computer. It's not actually a virus, but a malware type of program. I learned a lot about it when I was infected. And yes, people do pay the ransom. The last I read these companies get millions of $$ from people who think it's actually a government site and panic. The fact they ask for a moneygram (which is non-refundable and impossible to track) should clue people in that this is a scam. But unfortunately it doesn't.
The one plaguing me right now is the conduit search engine that has grabbed my computer. I've followed all the steps I can find on the web to get rid of it but it keeps popping back up every few days. It has apparently gotten in the registry. Stay away from CNET downloads! They used to be a reputable site to download programs but that's where I got infected. I'm furious with them.