Children should never give out their personal information to anyone online, including photos. Explain to your child that their personal information is sacred and they should not hand it over. Help them understand that people online who want to solicit this kind of information are usually not the nice kind.
Don't let your children select provocative chat names that might attract attention. Gender-neutral monikers are best. Also take an active role in checking which chat services your child uses and make sure they are safe. Most chat services and online forums require a minimum age of 13, but that can be bypassed easily.
Remind your child that people can be something other than what they seem - most especially online. There is nothing wrong with having a healthy distrust of people met online and keeping a distance is always a smart move. Tell them to avoid people who get too personal and that they should inform you if something uncomfortable happens to them online. When this happens, contact the relevant site's authorities.
Use parental control software. Windows 7 has built-in parental controls (located by searching for "parental controls") that you can use to determine what times your child can use the PC and what they can do. It would be smart to have a separate login account for your child, so that you can dictate what software they can access. There are also several free parenting control software options online, such as K9 and Norton's Online Family, which will give you the basic controls you require. If you want to buy a commercial product, take a look at this round-up of reviews.
Check your Internet history to see where you child has been. This might seem like an invasion of privacy, but with younger children it is imperative to see whether they have stumbled onto bad sites or been lured by pop-up ads. Also advise them to not click on ads (it's not like they can buy something anyway). Register an online email account for your child and check that periodically as well.
Look into the parental controls of the search engine you use. All the major engines allow you to block off mature and dangerous content.
Chat frequently about the Internet. Discuss what you and your child have found online. Foster a culture of exchanging links and sharing online discoveries. The more you make your child feel their web experience is isolated from yours, the less likely they are to come to you with problems they have encountered online.