Installing Windows 7 (from a download) using Parallels?

Hi, first post.
Ok so I've downloaded and installed Parallels to be able to run Windows 7. I then downloaded windows 7 from the Microsoft website. I now have a windows7.exe and two setup.box files on my desktop.
To be able to install Windows 7 using parallel do I need the windows install file to be an image file or is there a way around it?

Where did you download Windows 7 from the MS website? It should be an ISO (disc image). I'm pretty sure you need a disc image (or an actual disc).

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