I have downloaded "ubuntu-12.04.1-desktop-i386.iso" and extracted it using magic ISO. There is a file wubi.exe is the extracted folder. To install ubuntu i double clicked it ( i am using windows 7); it asks the isntallaton folder and asks to create username and password. Then straight away it says it is downloading "ubuntu-12.04.1-wubi-i386.tar.xz". It it shows nearly seven hours of downloading time remaining (i have a slow internet connection). Can't i install ubuntu offline? Thank you in advance.
Since you already have the iso (you didn't have to, the wubi.exe installer can be downloaded independently), there is no need to download the installation package again.
Just place the iso image in the same folder where the wubi.exe file is; start wubi.exe -- it should detect the iso file and run the installation offline. More on that here.
Alternatively, you can use the iso to install Ubuntu on a separate partition.
If you want to do a full install you will need to burn the iso to a CD and start your computer from it. Check this question
If you don't have a CD avaliable, check: How do I install Ubuntu from an USB drive? or Is it possible to install without a CD or USB drive?