As I go through the installation process by using, I want to have my Windows 7 intact. So go through the "installation type" stage and saw

Now I'm lost. Could this mean that "sda" represents Windows 7?

And there's another one

What does this configuration "Device for boot loader installation" do?

Thank you.

How many "drives" show up in Windows? How many physical hard drives has the machine got? What have you done, if anything, to prepare the hard drive[s] for the install?
What you see there shows one hard drive (which Linux calls device sda, it would call the next it finds sdb and so on) with 4 partitions labelled 1 to 4 which are all formatted to Microsoft's NTFS. At a guess the first partition is a boot partition to allow recovery, the next will show up as "C" in Windows and the next is either "D" in Windows or a recovery partition -- if it's "D" in Windows then the last partition will likely be a recovery partition if there is no "D" in Windows then the last partition may just be free space awaiting use as a recovery or similar. That's just a guess, mind you.
What you need to do is either create some free space on the hard drive shown to install Linux on or install a second hard drive to do so. How you do this depends really on what you see from Windows, whether you are bothered about keeping recovery partitions for Windows and how much data you have under Windows and where that is stored (i.e. is it on the "C" or "D" drive). Usually the safest way to make room for Linux is using Windows partitioning tools to remove an unused "D" drive. Otherwise it may be necessary to resize the existing Windows drive[s] in which case you need to be even more careful and may need to do things like defragment them first depending upon how much use the machine has had.
I did try to find an install guide but this one seems very lacking:
https://help.ubuntu.com/community/WindowsDualBoot
This seems potentially a little more helpful:
http://lifehacker.com/5403100/dual-b...erfect-harmony

Remember though, back up data and "Measure twice, cut once." (as my old woodwork teacher used to say) -- in other words learn what's on your system and plan things out before jumping in and installing. The process is mostly very logical and is straightforward once you get used to the terminology used.

Based on the information you posted, the first partition (sda1) is probably the windows boot partition and sda2 is the system partition, usually referred to as "C" in windows. The others are probably data partitions (sda3) and a recovery partition (sda4) which means you would need to delete one of them and resize/shrink another (either sda2 or sda3) as you seem to be using the BIOS/MBR system to boot which only allows 4 primary partitions.

Would there be a way to reduce the size dev/sda2 without "unallocated" chunk of space? I tried it and it failed.

That's not what you should be doing, at least until you know what you just asked. Simply put you cannot use sda2 to install Linux to as it stands -- you would have to at the very least reformat it and may have to remove it then create a new partition. As I mentioned you should look in Windows and find which drives you have and what is on them -- without that information nobody on here can help you.

Reducing the size of any of the windows partitions isn't going to help if you are using MBR as you are allowed only 4 primary partitions which you already have. You would need to delete one of them and with the info you have posted, there is no way we can tell which you might use.

To figure out what partitions Windows is using and for what:

Boot into Windows and login with an admin account.
Open the Start menu
Right-click "Computer"
Click "Manage"
On the left panel, click "Disk Management" (under "Storage")

You should now be at a screen that shows the partitions of your hard drive. From there, you can figure out which partitions are for what. If you're unsure, screenshot it and upload it here.

I just installed it on VMware Player.

OK,.. So you installed it on a VM (not a "real" installation). Your Linux installation should run fine, but be crippled by whatever Microsoft overhead is in place...