Here's a definition from David Chaffey, of the Chartered Insitute of Marketing:
"Like most buzz words ‘viral marketing’ means different things to different people. A viral marketing execution certainly needs to create a buzz to be successful. The two main forms of viral marketing are best known as ‘word-of-mouth’ and ‘word-of-mouse’. Both rely on networks of people to spread the word."
This quote comes from an article by Mr Chaffey, Is there life in viral marketing?, in which he discusses what viral marketing is, how it works and the legal implications of the new EU Privacy Directive. It is worth reading for the brief overview of the implications of the Act on on-line marketing within Europe.