The nanovirus was an example of nanotechnology which operated on a nanite scale and was around a billionth of a millimeter. They were in essence microscopic machines that were able to carry out very specific tasks suited for their size. They were no bigger than a single celled organism and instead of using their abilities to cure disease or mend blood vessels, the nanovirus worked to terrorize its victims by tapping into their visual cortex and rupturing an artery in their brain.
The virus was capable of infecting others along the way but were incapable of multiplying. This meant that once infecting numerous targets, their capabilities diminished as they spread themselves too thin and work at a reduced rate. They were programmed only to infect Humans and did not harm those with Ancient DNA. The nanovirus was essentially a machine run by a computer; one that was vulnerable to an electromagnetic pulse.
Victims of these nanites begin to encounter ghostly apparitions of death and hear shrill-like sounds which highlights the fact that the person is nearing death as the nanites begin their final work in the brain. (SGA: "Hot Zone")
During the Ancients' war against the Wraith, they sought to produce smaller machines that were capable of defeating their enemy. Thus, they created the nanovirus with the intention of infecting the Wraith who would be destroyed from within. (SGA: "Progeny") This meant that a section of Atlantis was put aside to serve as a viral lab. The failure of their experiment meant that the nanovirus was abandoned and the laboratory was closed down. The Atlantis expedition accidentally unleashed the virus which killed a number of them until a generator was detonated in close orbit which destroyed the nanomachines. At the time, the expedition did not know who created the virus. (SGA: "Hot Zone")