Theres 2 kinds.
One is a BluRay reader which is capable of reading Bluray, DVD, DL DVD, CD
... But can ONLY burn to CD-DVD-and DL DVD
Then Bluray Burners which can read all the formats as well as burn to them, including burning BD disc. (much more expensive)
Many BluRay drives will have a few Blurays they simply can not read.
Some do better or worse than others.
I like the LG BD drives myself. Mine has been a really good one, and has played nearly everything Ive thrown at it.
I've found 2 BluRays it could not play so fa:
Alien Vs Predator and I,Robot
As far as I am aware, all BD drives for a PC will have a few types they can not read. Although I could be mistaken.
As far as DVD playback, there should be no issues at all. And Windows 7 can handle playback.
The drive itself should be able to read & recognize 99% of all BluRay discs (generally speaking) however to actually play it, you will need playback software such as:
Power DVD, Arcsoft Total Media theater etc..
Most of the time theres playback software included with the drive. Although it may be a stripped version (such as only uses stereo sound only) that you can upgrade at a discount.