According to Wikipedia Malware is
Malware, short for malicious software, is software (or script or code) designed to disrupt computer operation, gather sensitive information, or gain unauthorized access to computer systems. It is a general term used to describe any kind of software or code specifically designed to exploit a computer, or the data it contains, without consent.[1] The expression is a general term used by computer professionals to mean a variety of forms of hostile, intrusive, or annoying software.[2]
Malware includes computer viruses, worms, trojan horses, spyware, dishonest adware, most rootkits, and other malicious programs. In law, malware is sometimes known as a computer contaminant, for instance in the legal codes of several U.S. states, including California and West Virginia.[3][4]
And there is Malware for Android according to lots of articles in big newspapers and Magazines. Mostly the Malware is bundled in well known applications or games, downloaded from insecure and doubful sites. During installation of this "known" application, the permissions given to it will be granted also to the bundled Malware. Immagine the application asks for root access, then the Malware will have it also and will be capable to do everything on your phone, like reading sensitive data you have on your phone and transmitting it, accessing your bank account etc.
So ok, one can be careful, checking exactly what you are downloading, not downloading warez or other pirate software which could be infected, but have been cases of infected apps on the Android Market, so....