A new bunch of viruses, malware, spywares around use this technique to hide themselves from the users. Seems like a new work around in the registry can hide files with hidden attribute, and disable the show hidden files option in the Folder options.
Even after you set the option to show hidden files and folders. It comes back to Do not show hidden files and folders.
Here is a solution to this problem. Go to Run>type Regedit and press enter.
Now navigate to
Make sure there is an entry called CheckedValue with type REG_DWORD and value is ‘1’
Now come back to folder option and set show hidden files and it will work