Since many newer machines may not have the benefit of a floppy disk built into their tower, you would have to create an "image" of a floppy boot disc if you wish to have Windows 95, as this OS will not boot off the CD. Here is a free program FloppyImage152 that will extract an image from a floppy that you can capture with VPC. But don't forget to check "Create compatible IMG files" in settings.i did everything steve says to do, and til i get to format it doesn't work,but i found this.
Delete your current Virtual machine and create a new one using the image file below -
Windows95b.img (select Diskette Images, windows95b.img)
Once the VM is defined, start it and press Floppy (on the action bar) - select "Capture Floppy Disk Image". Peruse to the location you downloaded the file above and then select "Action, Reset". It will remember the floppy mount until you release it (which you'll need to do once you've installed Windows).
From that point follow Steve's FAQ... Don't skip past any steps.
Edit -
By the way, I don't find any reference the the above quote (from you) in Steve's FAQ. Please use this one -
Virtual PC 2007 FAQ By Steve Metzler (Last updated: 3rd July, 2008)