Gmail hacked

Sounds like you got a malware. Malware could be a virus, a trojan, a worm or something else altogether. If your account was hacked, your password would have been changed, security questions and answers would also be changed so that you cannot retrieve your account, or would have a hard time retrieving it. There are a lot of malware attached in emails that when read/opened, will cause the malware to be stored in the reader's computer and then send emails to that person's contact. It's spamming and spreading itself. Remember the "I love you" virus? Best way to solve this would be disinfect your email and your computer. Advise everyone not to open malicious emails, like chain emails etc.

I haven't yet but thanks for the info, its really scary how some people use the web to undermine the interest of others for their own gains

Well, The thing you should know is, if a hacker attacked your account he ALWAYS try to change your password. So please note that your account wasn't hacked. The problem is occurred for you is, the spammers using your contacts list. That's all. This would happen in this way. You may subscribe any newsletter or something in any forum. Or you may try to send any new-year greetings to your contacts. At the time, instead of sending mails manually, people used to go greeting websites and they give their email contacts by simply providing a mail and password. So that they leech all your contacts and they will send a greeting email with your name and mail. Even some sites send greetings, from the desired mails, whatever we provide(e.g admin@gmail.com). Up to this point everything goes well. But some of the fraud/money minded companies( The one you may tried even before a long time, that you may forgot it), will keep the contacts and sell them to the spammers. So that the people will receive whatever mail you used before that time, like either your original mail or any other mail domain like I mentioned above. So This is the problem may occurred in your case. As from my experience, this won't stop. What your contact peoples have to do is, just read the mail; They may probably see some unsubscribe options. Just unsubscribe that mail. They may not receive mails more. Hope, this would be useful for you. :)