Holy cow, I wrote a book!
A customer liaison asked why their customer's Windows 7
machines could run
Magnifier only in Docked mode.
Full Screen and Lens mode were disabled.
The customer liaison was unable to reproduce the problem on
a physical machine,
but was able to reproduce it in a virtual machine.
Full Screen and Lens mode
require that desktop composition be enabled.
Windows will enable desktop composition by default if it thinks your
video card is capable of handling it.
(Finding the minimum hardware requirements for desktop composition
is left as an exercise.)
This was visible in the screen shots provided by the customer liaison.
In the screen shot where Full Screen and Lens modes were enabled,
the Aero theme was being used,
whereas in the screen shot where they were disabled,
the theme was Windows 7 Basic.
The Windows 7 Basic theme is used when desktop composition is disabled.
A quick way to check whether desktop composition is enabled is to hit
Alt+Tab and see whether windows get the Aero Peek
effect when you select them.
Aero Peek is a feature that is provided by the desktop compositor.