You can create a virtual partition or clearly install a separate hard drive (Physical hard drive). The virtual segregation is done on the same hard drive but they appear in Window Explorer as separate hard drive.

Benefits of a Standalone Data Partition or Virtual partition:

Fresh operating system installations are easier. Either you make a fresh installation of Windows 7 or format your hard disk and then install, the segregation reduces any chance of conflict, which may happen if the partitioned are not done. Ultimately, it also ensures that your earlier data are more safe.

Accessing data from multi-booting operating systems is easier. Suppose you don’t want to completely rely on the Windows 7; in that case too the standalone data drive will be important for you. Hence, you can make a dual booting system. Make use of whatever OS as per your choice. Give them separate user account as well. Both the OS will be able to access your files from their dedicated location without disturbing through the other’s default folder hierarchy.

Separate hard drives reduce the risk of total failure. If your one drive fails then you can make use of other OS and work without any interruption. If your data partition fails, you’ve still got a working PC: you can just restore a data backup without having to reinstall Windows. With a separate partition for your data, it’s just easier to image, back up, or transfer your important files, photos, videos, and tunes.

You might get better performance. This will provide Windows a different additional place to store the virtual memory and paging information. Hence, it will optimize the Windows 7 performance as well.