Helping people with computers... one answer at a time.
There are different ways to reinstall Windows. Which is appropriate depends on the problem you're attempting to solve.
There are definitely scenarios where a reinstallation of Windows is required. Be it simple "software rot" (the degradation of your system as you add, and remove, programs over time), or something more malicious like a virus or an accumulation of spyware.
The first question isn't really "how?", it's "how much?"
The first decision to make, really, is how much of a reinstallation you want to perform. Do you want to reinstall only Windows? Or perhaps the rest of the system as well?
It sounds like a lot of work ... and it is. But in my experience a completely clean reinstallation of Windows and all applications is the only real way to ensure that the machine is truly and absolutely clean.
It's a long process that begins with backing up all your data, and the installing Windows from scratch, including a reformat of the hard disk, and then reinstalling all of your applications and restoring your data.
Did I mention it's a lot of work?
It's very close to what happens when you get a new machine. In fact, quite often, I'll time it so that it happens when I get a new machine. The new machine gets built out with all my applications and my data gets moved, and then I reformat and reinstall Windows on the old machine, but then use it for some other purpose.
So what if you don't want to go through all that hassle? Then you want what's commonly called a "repair install". When you boot from the Windows Installation CD, it's one of the options along the way. It will reinstall Windows while preserving your applications and data.
The "problem", if you want to call it that, with a repair installation, is that it does not fix nearly as many problems as a complete reinstall. If the problem is with an application, a repair install of only Windows may not fix the application's issues.
Rather than reinvent the wheel here, I'll point you at a couple of very good resources out on the 'net.