Most likely it’s an e-mail worm of the “spambot” variety. The worm is probably not on your system (although you should run a scan or two just to make sure). The worm is probably on someone else’s system. You’ll never find out whose. It could be anywhere in the world.
There are a lot of spambot worms out there that work surreptitiously on an infected PC, and just rummage through a person’s address book for FROM and TO addresses. In this case, it found your address to insert into the FROM field, and a bunch of other random addresses in the address list to insert into the TO field.
If TO field recipient’s address is invalid, then the mail server at the recipient’s domain sends back a non-delivery report to the sender. The sender, in this case, is you, since your name is in the FROM field.
You can’t really do much to stop this sort of thing if it’s someone ELSE’S infected machine (or a deliberately set-up spambot machine) that is doing it. The only thing you can do is delete the messages, or get a good spam filtering program. Although, I’m not sure what to recommend that would hook into a web mail account like Hotmail. I’m mostly familiar with POP3 and Exchange spam filters.
Good luck.
With Hotmail the addresses do not reside on my computer, so wouldn’t that rule out my computer as the source.