To maintain the academic integrity of an exam, students are not permitted to run LockDown Browser Student Edition when a virtual machine is detected on the system. This includes VM host applications (VMWare, VirtualBox, etc), thin apps (VMWare ThinApp, Microsoft App-v, etc), Windows Emulators (Linux-WINE, CodeWeavers CrossOver, etc) or other virtualization ("Virtual Hard Drives" or "vHDs", "Virtual Displays" or "Virtual Desktops").
Anti-virus software can sometimes result in this type of error when running small "sandbox" VMs. Shutting down the anti-virus software temporarily while you use LockDown Browser may help.
The other possible cause of the VM warning are leftover virtual machine device drivers such as the VMWare Pointing Device mouse driver from a previous installation of VMWare (or a physical computer image created from a VM image.) We suggest reviewing Windows Control Panel->Device Manager and remove any VM drivers, allowing Windows to restore the default device driver.
If the deadline for an exam is near, you may want to consider locating another computer, Mac or Windows, with LockDown Browser. There is also LockDown Browser for iPad, if allowed by the instructor.