Cryptovirology is the application of cryptography techniques to create viruses. It involves encrypting a virus to make it difficult to detect using signatures. A cryptovirus typically encrypts data on a system, then encrypts the key and holds the data for ransom until payment is received. This poses challenges for anti-virus software as encrypted viruses are hard to identify. Cryptography allows viruses to communicate covertly and increases their ability to survive. Countermeasures like regular software and backup updates can help, but cryptoviruses remain a threat as antivirus vendors work to develop defenses against this evolving tactic.