To create a Calendar event with in Outlook 2007, just follow these steps:

1. Open the invitation email which includes the attached .ICS file.
2. Once the email is open, left click on the attachment (in Yahoo! Mail - the exact steps here may differ for other email providers) and choose Save As. Save this file in a folder on your computer that you specify.
3. Once you have saved the file, click File in Outlook, and choose the Import and Export option.
4. Click the Import an iCalendar (.ics) or vCalendar file (.vcs) option.
5. Click Next.
6. Browse to the file within your computer, select it, and click OK.
7. The event is now added to your Outlook Calendar.