Windows 7 doesnot allow you to install off the same Hard Disk. But if you didn't want to burn the .iso image of Windows 7 that you downloaded to a new DVD - you can still install it off the .iso file by using the method below.
You will need a portable hard disk / pen drive though.
Incase, you have a portable hard disk or a pen drive - do the following :
1. Get WinRar (www.rarlabs.com) and install the software on your machine. WinRar is similar to winzip but supports many other formats including .iso.
2. Extract the .iso of Win7 to your pen drive / portable hard disk. Place the extracted files into the root of the drive - your other data can be put into folders.
3. Restart your laptop and hold F9 / F2 to enter into boot-menu which gives you a choice to load from. Here select your pen-drive / portable hard disk - usually a USB device.
Done - that's all it takes. You can now go ahead with the normal install process.