SOLVED!
First thing, it is not necessary a virus. Do not spend hours looking for malware or virus if you already have an antivirus installed.
This problem happend to me after a Windows Update. The first time I had identified the culprit to "Update for Windows 7 for x64-based Systems (KB2952664)" that time after two days I only solved the problem by recovering windows to a previous update prior to that above. From then on I installed windows updates one by one until it happened again.
The second time Windows Update did it but this time I could not recover my system to any prior time, it would stuck at any point the system recovery and return, after re-starting, to the stage that it does not open the folders, then even worst, the log of all previous updates was empty. For some unknown reason it disappeared.
After trying everything at reach and tens of suggestions from everywhere in the internet for two weeks the above suggestion solved the problem for my system Win7 Pro 64 but with an extra step.
Open regedit and change the '(default)' value to 'explore' in the next two lines (no quotes marks)
HKEY_CLASSES_ROOT\Directory\shell\
HKEY_CLASSES_ROOT\Folder\shell\
I did it to only one of them separately and did not work. Only when both lines are changed to 'explore' solved the problem. I hope it helps.
(default)
toexplore
worked for me. – Sithu – 2016-11-20T15:49:05.720