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Make sure that the camera is plugged in and that the software is actually installed(check your start menu for Microsoft Lifecam).
If you didn't restart after you installed the software do that.
Go into My Computer and look in there for an icon that is labeled something like Microsoft Lifecam vx-1000. If you see that, you are connected to the camera -- its plugged in. If you don't see it, plug it into different usb slots. You can try to Open (double click) the Microsoft Lifecam VX-1000 icon to see if it starts a video feed.
Run the software and see what happens, I believe there is a setup wizard that will help you configure some things.