After searching through various posts it turns out that my firewall was the problem. I use bitdefender and under settings > firewall I turned internet sharing to on and it all worked fine. If you want to test to see if it is your firewall just turn it off and try and access the internet. I am using windows 7 and an atheros AR9002WB wireless adapter.
Just thought I would share my findings incase someone else found it helpful.
BTW thanks for making Virtual Router free and especially making it ad free! :)
Comments: ** Comment from web user: maheshdeeptha **
I installed virtual router 1.0 on my laptop which uses usb dongle for internet . I gave the network name and password and started the virtual router. after which I could see "local area connection*14" in my network connections. Then, in my network connection, I selected my active network (usb dongle) and under its properties, I enabled sharing, selecting the "local area connection*14". In the virtual router window, the shared connection dropdown box is not enabled and it is showing None. Even after refresh, I am not able to select anything. But my tablet detects this wifi name and wifi is established between my tablet and laptop and my virtual router is showing Peers connected 1: and it shows some Mac address... of the connected device, But I am not able to access internet in my tablet. Kindly let me know what is the problem and any more settings are to be done.