I have Morrowind on Steam and so I downloaded it last night and tried to play it this morning.

It requires the latest version of DirectX, so it provided a link for me. I follow the link to the Microsoft site and download the file, then try to install it. But then it says it is about to install and this box pops up:

I've had this problem before on a past game and never fixed it. How do I fix it? I have Windows 7.

Morrowind requires Directx 9

Which obviously is not the latest version, but newer versions do not come with older versions included, so you will always need 9 installed.

And keep in mind that downloading it is not enough. You will also need to unpackage/install it.

This is the page I am using:

http://www.microsoft.com/en-us/download/details.aspx?id=35

How do I get/use DirectX9?

I did install it. Or tried to, but I got that error up above.

Can you walk me through how to do this?

You don't want the Web Installer, as that will just put the newest version on. You want the Redistributable which is about 280MB in size IIRC. Search for that, you will have to dig for it more than likely.

Download here: http://www.microsoft.com/en-us/download/details.aspx?id=8109 (95.8MB)

Double-click the directx_Jun2010_redist.exe, this will extract the files (this isn't installing it yet). I recommend that you extract the files to a downloads folder (194MB extracted). Navigate to the newly created folder and find the DXSETUP.exe and double-click it. Follow the instructions.