Sextortion is a trojan which controls the affected PC (including web cam), and search the PC for explicit Images. See below what FBI says
The hacker knew every move the unsuspecting victim made. He controlled her computer webcam and microphone. He could see her in her bedroom, hear her conversations, knew every keystroke she made online. And he threatened to expose her secrets unless she bowed to his demands.
It may sound like the plot for a scary teen movie, but it actually happened, and there wasn’t just one victim—there were more than 200, and dozens of them were adolescent girls.
The trojan send an email asking if the victim wanted to see a scary video, because of the mail coming from an trusted source the victim opens the attachment, and the virus get installed on the computer. The virus will have complete control over the infected computer including Files and Folders, Webcam, MicroPhones etc.
FBI arrested the man behind this Trojan and investigating more on this now.
Read more about this from FBI and Inform your friends too.
[Via Security Watch]