The printer driver (in simple terms: the 'messenger' between the printer and your computer) is designed for Windows XP. Windows 7 has found this problem and so is going to run the driver in an XP mode. This means that the computer is working like XP for that printer only (the rest of the computer will work the same).
Think of it like the printer speaks Chinese and Windows XP speaks French. The driver you have at the moment can speak both Chinese and French and is a translator between the two. However, you have now updated to Windows 7 which speaks German. The original driver can't speak German and so can no longer be a translator. So Windows 7 is going to communicate to the driver (translator) through its French Windows XP friend.
Obviously that all makes total sense

So that answers the first part of your question, Shaun's suggestion should fix the problem but let us know if it doesn't.
Lovely analogy and fully understood ........ not bad for an 87 year old codger.
However I am still in deep doodoo as the message I get now is;
Cannot communicate with the scanner.
Make sure the scanner is on,correctly setup and connected with no errors indicated.
(and it is)For detailed information,see Solving Problems in the User's Guide.
The user's guide under 'solving problems' covers paper jams,fax errors,cartridge needs replacing etc but does not address my problem at all.
When I get in touch with the manufacturer I am bombarded with FAQ's that don't address the problem.
Then there is a box to click OK which one clicks on and it disappears.
Sadly Shawn's approach yielded nothing
What do I do ....... if I throw myself out of the window it won't kill me as I live in a bungalow!!
Joe