A very common issue that iPhone 4 owners experience when trying to tether their iPhone to a Windows 7 laptop is a driver installation issue related to a device called “Bluetooth Peripheral Device”.
First off, it is not necessary to install the bloated iTunes 10.x software on the laptop in order to get the iPhone to communicate with Windows properly over Bluetooth. A very simple modification to the device services will fix this issue and allow the device to communicate. Assuming that you have Bluetooth and Personal Hotspot configured properly on your iPhone and that Bluetooth is setup properly on your Windows 7 laptop, simply open up your Bluetooth devices list, right click on the iPhone and go to Properties. A new window will appear. You should see a Service tab on this window. On this tab you will be shown a list of services that are available for this device. Uncheck the Wireless iAP service and click OK. This will fix the driver issue since Windows will no longer will ask for that device. Now you can connect to the tethering services on the phone by right clicking on the device and selecting Connect Using -> Access Point.
If all goes well, you should see a notification on your phone indicating that your laptop is connected to the Personal Hotspot and you should now be able to access the internet from your laptop.