The vino-preferences application gave that error because the application is graphical and you can't display graphical linux applications from the command line without doing some extra work.
It's hard to know if your cloud server has provided some kind of web based interface to run commands, or if you have connected using an SSH client (such as Putty on Windows). If you want to enable vino using vino-preferences then you will need to run it in a graphical environment. If the cloud provider doesn't provide one you will need to connect using an SSH client and X server for Windows.
This is less painful than it sounds. I'll assume you have a working SSH client, if not google [putty download] and install it. Then look in your cloud providers documentation for how to connect to their service.
After that you will need to install an X server. I've used Xming in the past and it's quite easy. Get it here: http://www.straightrunning.com/XmingNotes/. Install Xming and start the X server. Then follow these instructions to configure Putty:
Once you have a working SSH connection you should be able to run the vion-preferences application and have the interface display locally on your desktop.
Good luck with your first steps in Linux!