I am on win 7 and trying to install a .NET windows service using the service installer. And get the error as shown in the pic. I thought Its becuase I was not admin on that machine and got that error. but then I used an admin account and got the same error. Any idea what could be the reason.

Run your process elevated. Right click -> Run as administrator.
If you suspect the problem in the installer, it is easy to install service from command line. The command is
You will need to execute this command from elevated cmd window.