Windows 7 Codecs is a codec pack specifically designed for Windows 7, and was created by the shark007, the same author who created the Vista codec pack.
The description on the website says that the codec pack will automatically remove most other popular codec releases and install new ones onto your computer. It also does not contain a media player or will not affect your file-type associations. You don’t really have to worry about this - he’s basically telling you what the codec pack does.
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If you’ve been wondering why Windows 7 can play many of your media files out-of-the-box, it’s because Windows 7 now natively supports most popular formats including H.264, Xvid, and DivX. Even so, there are many other multimedia formats that Windows cannot play without the proper codec. To solve this problem, you can download a codec pack. A codec pack basically contains many other codecs required to play certain media files so you don’t have to download them one-by-one.
You may or may not want a codec pack. A codec pack would be good for those who want to view a variety of different media formats without having to download another media player, or for those who don’t want to worry about downloading additional codecs in the future. (Link)