First back up ALL of your personal data. Don’t forget your email data files and your browser bookmarks
If the machine has the option to make System restore CDs do it now. http://windows.microsoft.com/en-US/windows7/Create-a-system-repair-disc
Also go to the manufacturer’s website, download the latest driver updates (plus those for any third party hardware you have installed) and burn these to a CD or DVD. They will make it easier to install later.
If you want to be really sure that the data is gone, use the Win 7 Cipher tool to secure erase your user data folders http://www.dkszone.net/permanently-delete-data-builtin-cipher-tool-windows-7 or choose a secure erase option http://www.sevenforums.com/tutorials/172617-secure-erase-wipe-definition-methods.html or go to Darik’s Boot and Nuke site (DBAN) to make a bootable disk that will secure erase the drive. A DoD Short Wipe (3 pass) will overwrite even your erased data sectors with 0’s and 1’s.
Then, if you have the Windows CD or the factory System Restore CD, reboot the machine from the CD and reformat the hard drive and install the OS fresh.
If you don’t have the CD, then depending on the manufacturer you may have a hidden partition on the drive with the restore files, follow the manufacturer’s direction to break into the system restore process during boot up (typically you hit a particular Function key before Windows starts)
Alternatively, you can order Restore CDs from many manufacturers for a fee of $20 – $35
Finally, if you are still worried about the data on the hard drive, remove the hard drive from the machine and physically destroy the drive with a hammer. You can remove the cover of the drive so that you can smash the platters inside.