On Windows 7 Pro 64 - After changing the registry value for HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\services\MSIServer\WOW64 from 1 (the default) to 0, the Windows Installer Service was functional again.
In my case, on Vista x64 Ultimate, the solution was to change the "ImagePath" with regedit for HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Services\msiserver from C:\Windows\SysWOW64 to C:\Windows\System32.
In one case on Windows 2003 SP1, this event appeared when trying to install an application while the D: drive was still being formatted. Wait for the format to complete. Restart the computer if necessary.
Re-registering the Windows Installer or reinstalling it could solve this problem. See ME315346
Programs that are assigned to users who log on to Terminal Services-based servers that run in Remote Administration mode may not be installed. This issue occurs with assigned Microsoft Installer (MSI) programs that invoke custom options by using a script. See ME311727
for details on fixing this problem.
for a description on how to re-register the Windows Installer Service.
To see how you can clean-up corrupted MS Installer entries see ME290301