Windows Live Messenger (also known as MSN Messenger and Windows Messenger) was a common chat program that allowed phone calls and webcam conversations. It was a part of the free Windows Live Essentials 2011 (for Windows XP and Vista) and Windows Essentials 2012 (for Windows 7 and 8) suites. Microsoft replaced Live Messenger with Skype in April, 2013.
To add an extra protection layer from even unpatched security bugs, please read our Microsoft EMET article!
First, while Live Messenger window is open, press Alt key on your keyboard once. Then open Tools menu and click the Options... command. Note that you can do the same with just keyboard - pressing Alt, then T and then O keys once opens Options of any Windows (Live) Essentials program. 
Because Windows Live Messenger 2011 and 2012 have different settings, they are discussed separately.
Securing Windows Live Messenger 2012 in Windows 7 and 8
Open Sign in tab from the left. Verify that the Show me all the other places I'm signed in at when I sign in option is checked. This ensures that nobody is misusing your account.
Move to the Messages tab and disable automatic accepts for all content types - Voice clips, Nudges, Winks and Invitations to view photos.
The History tab contains the most important setting - Automatically save my conversation history. Anyone who cares about his/her privacy should turn the feature off.
Finally, open the Privacy tab and enable the Don't save my contact list or social updates on this computer and Ask for my password when I go to Hotmail and other websites that require a Windows Live ID options. This prevents Windows Live Messenger from storing all your Windows Live and Facebook contacts, and from automatic logins to your Windows Live ID account.
Those who are extremely concerned about their privacy can also disable the Allowing Microsoft to collect data about your computer and how you use Windows Live helps us improve our products and services option. This ensures that no information about you is sent to Redmond.
Click OK to close Options.
Securing Windows Live Messenger 2011 in Windows XP and Vista
The first tab of Options window, Personal, should be active by default. The privacy-aware folks should clear the Allow others to see that I have a webcam box to prevent curious people starting video chats. By default, this option is turned on even when you have no webcam connected.
Move on to the Sign In tab on the left. Always clear the Allow automatic sign in when connected to the Internet box. This will prevent the program from logging you in without you knowing it. Do not underrate the option - sometimes you need to be left alone and Live Messenger signing in by itself is not the good way! 
Also make sure that the Sign me out of all other places when I sign in to Messenger and Show me all the other places I'm signed in at when I sign in options are checked. The first one makes sure that if you forgot to sign out from your work computer, the messages from your contacts do not open in the wrong computer. The second one lists all the places you are signed in so that you can check that nobody else is misusing your Messenger account.
Next, open the Messages tab.
Here you can turn off some not-so-important options such as Allow me to send and receive Nudges (the stupid things that make your Live Messenger windows shake, rattle and roll), Play winks automatically when they are received, Play voice clips automatically when they are received (imagine some loud naughty noise while you are comfortably watching TV or working) and Automatically accept photo invitations.
The very important thing here is the Automatically keep a history of my conversations option. Every privacy-aware person should turn the feature off. Most of us don't need to check their Live Messenger chats afterwards. You're not the FBI! 
Now open the File Transfer tab from the left. To be protected from Live Messenger worms, viruses and other malware, check the Automatically reject file transfers for known unsafe file types box. This will deny receiving all executable file types, such as .exe, .com, .bat, .vbs; but also Access databases (.mdb and .mde). Well, you should not send or receive any programs via Live Messenger, anyway...
And finally click the most essential tab - Security.
Make sure you have the Ask for my password when I go to Hotmail and other websites that require a Windows Live ID box is checked. This is a very important setting as it prevents malware from automatically accessing your e-mail accounts and other Windows Live services. This also ensures that someone who is misusing your computer can not access those services without knowing your password.
You can leave other options on the tab checked unless you are really paranoid about your privacy and security.
Click OK to close the Options window.
