You can save sketches anywhere you want. And each sketch had it's own data subfolder (when there is data, otherwise you don't need such a folder). The main sketchbook on windows 7 should be located (and automatically created at first run) here:

C:\Users\[YourUserName]\Documents\Processing

See File - Preferences for the exact location on your computer.

That's not (not really) a programming question, so I moved it.

Processing doesn't come with an installer, as it doesn't really need one. It can be confusing for computer users not familiar with this kind of packaging, but it is good for experienced users! It easily allow to keep several versions of Processing side by side.

You have to extract the content of the zip to a folder, as you did. At the top of the folder hierarchy you unzipped, you have a processing.exe file. You just double-click it to get the PDE to run. You can create yourself a shortcut on the Desk or on the Start menu or other places (I have it in the Quick Start bar), if you want.

Then go to File > Preferences, you will see where Processing locates by default the sketch folder (as said above). You can change this location if you want (I have a partition for dev. stuff).