The virus infects Time Lords, but lies dormant until regeneration, at which point the infected Time Lord is "zombified".
The virus broke out on Gallifrey, and Romana II was faced with the choice of letting Gallifrey fall to the virus in the hope of rebuilding it with the Biodata Archive, or to administer the "cure" which would render the Time Lords unable to regenerate. (AUDIO: Panacea)
President Matthias quarantined all those infected with the virus in an attempt to cure the virus whilst Romana was away. (AUDIO: Ascension)