If you need to test your apps on multiple versions of IE, you've run into the problem where Windows will only allow one IE version to be installed on the box. There are ways to get around this limitation, such as using Virtual PC, etc.
But I'd like to run IE native on the OS. In the past, the great MultipleIEs from TredoSoft did the trick: You had IE7 already installed, and the tool added all the previous versions you needed. Now with IE8, it's a little trickier.
After installing IE8 and the great Multiple-IE app from TredoSoft, follow the instructions they provide to add a standalone IE7 to your box. I used the IE7 Standalone exe, which automatically downloads IE7 and does all the work for you.
The first time I started the standalone IE7, it didn't seem to work correctly. After shutting it down and restarting, it worked like a charm.