Spy phones are a relatively new creation and have been about since 2003. These fiendish devices exploit mobile phones by turning them into surveillance devices. Essentially a mobile phone is modified in hardware or software to allow someone to dial the mobile phone from a remote location and listen in using the built-in microphone. The phone is modified to answer automatically and without creating audio or video cues that the phone has answered the call.

The hardware modifications are based on making physical changes to the phone using a soldering iron. This might be removing lights, disabling the LCD screen and setting the phone to automatically answer. Hardware modifications are not so common now as software modifications are easier and more reliable.
The older software modifications made the phone look as if it was completely dead, just like the hardware modifications. The newer versions use the latest mobile phones and also give you features such as being able to relay SMS messages from that phone to your phone, and allow you to listen to conversations taking place on the target phone itself!
Spy phones are currently audio only. Video-based spy phones are still very experimental and low quality.