Open the command prompt, go to a directory different from your JDK install directory, and type "javac -version". This should display the version of your SDK. Make sure it is correct. If an error like "Command not found" is displayed, make sure you have correctly set your PATH.
It says that 'javac is not recognized as an internal or external command, operable program or batch file.'
I have attached screen clippings of the directory structure and how I configured the path and JAVA_HOME variables.
Your JAVA_HOME is pointing to C:\Program Files\Java\jre7\. A JRE is the runtime only, and doesn't have the compiler. You need to either specifically add C:\Program Files\Java\jdk1.7.0_05\bin to the PATH variable, or you need to change JAVA_HOME to C:\Program Files\Java\jdk1.7.0_05.
Then make sure you close the command prompt and re-open it.