SSH2 on Windows 7 machine

Connect to Windows 7 via SSH2.

Also, I am a bit confused as to the difference between SSH and SSH2.

Try freeshd as it is free.  Main difference between SSH and SSH2 is that SSH2 uses separate protocols for authentication, transport and connection.  It also support Diffie-Hellman key exchange.  Refer to links below for a good comparison:

https://kb.iu.edu/d/aelc
http://www.differencebetween.com/difference-between-ssh1-and-vs-ssh2/
http://www.snailbook.com/faq/ssh-1-vs-2.auto.html

The program SSH (Secure Shell) provides an encrypted channel for logging into another computer over a network, executing commands on a remote computer, and moving files from one computer to another. SSH provides strong host-to-host and user authentication as well as secure encrypted communications over the Internet.

SSH2 is a more secure, efficient, and portable version of SSH that includes SFTP, which is functionally similar to FTP, but is SSH2 encrypted.

https://kb.iu.edu/d/aelc

As mentioned above windows does not come with a SSH or SSH2 Server or Client you will need a 3rd party program do accomplish this

Let's look at this from another perspective - WHY do you want to connect to the Windows machine?  Forget about how - we get it, you want it secure, but what do you expect to do once you connect?  If you're a Windows novice, command line management won't exactly be easy for you.

Not really a windows novice just not familiar with SSH/SSH2. I can and have done command line so I am familiar with it.

What I am really trying to do is to setup the Window machine for vendor to securely access and transfer some backup files they will be creating for us. They are the ones who have requested SSH2 with a key for access.

The information they are transfering are backup files from a "Drupal" site including the database, files, and images. I requested this so that I could have a copy of these files to our location as an additional backup.

The vendor likely works with linux based web servers and SSH on Linux is quite common.  Did they ask (or you ask) about other methods for transferring the files to Windows systems?  If this is something they do regular with their customers they would possibly have at least some prior experience and could give at least suggestions on how you might accomplish this with Windows.  

I would suggest alternate methods, including using an SFTP/FTPS client to download the files from a server where they could easily make them available to you.  

Bottom line: you can fight to get this working and maybe at the end of the day you will, but odds are, you'd be better served finding an alternate, mutually agreeable method of data transfer.