As both computers are connected to the router, they are already "networked". Make sure both computers are in the *same* Workgroup (the default name for both Vista and Win7 will probably be WORKGROUP anyway).
Ideally, you want to be logged in to both computers with the *same* Username & Password, then set any folders that you want to have available over the network as "shared" by right clicking and selecting the Sharing option.
In the Network and Sharing Center of both computers (in Win7 you need to click the "Change advanced sharing settings" link at the left), make sure you have turned on:
- Network Discovery
- File & Printer Sharing
- Public Folder Sharing
In Win7, also enable "File sharing for devices that use 40 or 56-bit encryption.
See how you get on with that and post back if you have problems.