I've also called this plan "Bullet-proof Security", although it's more of a bullet-proof vest than a full suit of armor.
Although I believe it's hella stout defense, I use a separate computer for online banking, taxes and business transactions. I do use my everyday computer for credit card purchases though. [see part-3]
Part 2 — Windows 7 (and Vista) >>>
Part 2 — Windows XP >>>
Part 3 — Banking, et al. >>>

The motivation of online attackers has morphed from graffiti to greed. International networks of skilled Internet criminals now design, sell and deploy sophisticated crimeware. Fresh attacks begin as soon as vulnerabilities become publicly known, and sometimes long before. Botnets — networks of compromised computers — are openly rented online. Exploitable data pilfered from victims is sold at commodity prices. [examples]
Reactive security programs can no longer keep up with the flood of emerging threats. There now are literally millions of new variants of malware every year. Security software vendors can no longer add new signatures (definitions) fast enough to keep up. And the malware scanners introduce new vulnerabilities of their own.
Like many others, because conventional protection was getting out of hand, I switched to a proactive, behavior-based defense. That reduces the number of security programs needed for an adequate defense, and with fewer intrusive programs to slow it down, my computer is more responsive. The proactive approach also means that I am more secure than I was before.
Attackers now use "designer" malware to get past security software. They test each variant to make sure it is not (yet) detected by popular antimalware programs. The security programs fail to detect the new variants, but they increase the "surface area" exposed to attack. Installing too many signature-based programs is a liability, not an asset.
Blocking viruses and spyware by using signature-based scanning is a reactive measure. There's no way to keep signatures up to date for the new malware that's churned out every day. Some crimeware is even designed to generate a new signature for each attack. Virus scanning still has its place, but you also need something smarter.
Malware has to find a way to install itself before it can initiate harmful action. Most of these installation behaviors are well known. Why not watch for this malicious behavior instead of trying to catch every variant of the malware? If you can block installation, the malware is stymied.
There's another dimension of behavior that can be blocked too. Malware has to come from somewhere. Some websites silently install malware when you visit. Others serve up malware disguised as useful software. Why not block those evil websites?
There are now online services that screen websites for malware and other adverse behavior. The best of these services are augmented by human networks that report problem websites. McAfee SiteAdvisor and Exploit Prevention Lab's LinkScanner are prime examples of services that block malware at the website level. Firefox 3 natively blocks access to websites that are known to attack visiting computers.
If you visit the websites behind the software and services that I use in my setups, [XP] [7] you'll learn more about how they add "smarts" to security. You'll also discover that this strategy is not original with me. ;-)
Part 2 — Windows 7 (and Vista) >>>
Part 2 — Windows XP >>>
Part 3 — Banking, et al. >>>