ANSWERS: 2
  • Within code. Older viruses were so called because they were "snippets" of code that would embed within executable code and replicate, similar to a virus embedding itself within the nucleus of a cell and using the cell to produce more of itself. Later viruses and worms and whatnot can be partial or even whole executables, disguised as something benign, that happily analyses and places snippets of code within existing files. These can then reside in the working memory as well as within files. Nasty stuff.
  • A virus is only one type of infection, so I'll deal with all types in my answer. Infections can reside in files, the boot sector of any kind of drive, CD or DVD, in CMOS (on your motherboard where your BIOS settings are stored).

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