Microsoft SpyNet is a cloud service that allows the FEP or MSE client on your computer to report information about programs that exhibit suspicious behavior to the Microsoft Malware Protection Center (MMPC) researchers. When this information is reported, definitions for previously unknown threats can be created and distributed, minimizing the time that a new threat is spreading in the wild before protection is available.
Microsoft SpyNet is the network of Windows Defender and Microsoft Security Essentials users that help determine which programs are classified as spyware. The signatures created for any submitted programs by the users of the product are available to all users, displayed as a bar graph that shows the percentage of people who have allowed, blocked, or removed an item. This method of spyware classification allows rare, unknown, or new spyware to be categorized as most people choose to send their data
Sorry if I sound a bit technical, but this has to be technical. We are discussing a cloud service that effectively helps block threats and attacks.
So, how does SkyNet do that? Simple, it allows the FEP or MSE client on your system to report, to MMPC (Microsoft Malware Protection Center) researchers, about programs exhibiting suspicious behavior. Then those researchers, who are always there doing their job, would create and distribute definitions for such previously unknown threats. The report that's sent using SpyNet also helps recognize if a definition is already available and if so, release it from the cloud, in real time. This helps a lot in protecting users from newer kinds of threats.