Nope its not paranoia NS - sadly ransom-ware such as this is very real and out there. Its nothing to do with Microsoft btw, its progression and evolution of the virus.
Many years ago I used to make a bit of beer money cleaning out viruses/trojans etc.. having studied them at degree level I found them fascinating and at one time it was a satisfaction challenge to get rid of it on other peoples PCs. These days I wont do it any more because its way too time consuming and viruses have got more sophisticated.
I think people like HP who do stuff like virus cleaning will understand just how time consuming it can be particularly if people want you to be able to recover all their files.. and how they expect it done for little money. Its why the likes of PCworld will only wipe the drives and anything you had on there gone forever.
Ive gotten rid of various scareware which presents itself as ransomware, but in recent years the viruses & trojans that use encryption mean that you have no chance of being able to do anything when the other side holds the key. The only option is to payup.
Ransomware can be a very lucrative multi-million dollar industry. Its estimated that
Cryptolocker procured $27 million between 15th Oct - 18th Dec 2013. CryptoLocker was just one of many variants of ransomware thats out there