You can install it on a separate partition or another HDD using the disk like you would when installing Windows. Or you can install it on your Windows partition using the installer from within Windows.
All your Windows files will be separate from your Linux ones, but I do believe there is a program for Linux that lets you access your Windows files from within Linux. Linux uses a different file format to Windows, can't remember what it is but Windows is NTFS and Linux is something different.
I used to dual boot Ubuntoo with Windows 7 but it's been a while and can't remember all the details.