Re-Installing windows - Setup is starting services then error.

Hi, my laptop wouldn't start up and came up with an error. I went back to windows when it was first purchased so I wouldn't lose my files too. Now when I start up it says "Setup is starting services" and after about 5 seconds it comes up with the error:
"The computer restarted unexpectedly or encountered an unexpected error.

Windows installation cannot proceed. To install Windows, click "OK" to restart the computer, and then restart the installation."

The problem is whenever I click "OK" and it restarts it just comes back with the same error. It used to be a different error, Windows could not complete the installation for some reason that I cant remember. That also put me in this boot loop.

I just want to find out how to fix this so I can go back to all my files that are very important. I cannot lose these files or my life will be over!

Specs:
Acer Aspire 5742G
Windows 7 home premium 64bit.
8192mb memory
128mb video memory
Intel core i3 M380 @ 2.53GHz

You should always back up your files externally as well as make your Recovery Disks or save a Backup Image, so that if Win7 becomes irreparable you can reimage it and put your files back.

Works through these steps for Troubleshooting Windows 7 Failure to Boot which include how to copy out your data externally which I would do first if you have data you cannot risk losing.