Installing CKEditor in Drupal-7 requires some files to be uploaded into the ckeditor folder for it to be properly functional.
1) Install CKEditor from http://drupal.org/project/ckeditor. Do not enable CKEditor from the Modules list. Leave it disabled.
Below is a cpanel-screenshot of CKEditor installed. Note, for this example, Drupal is installed inside a folder named "cs1", thus the ckeditor module "ckeditor" is listed in: public_html/cs1/sites/all/modules
Inside the "ckeditor" directory(above) is another directory(Figure#1b below) where we have to upload "ckeditor's core files into. These files will be downloaded from ckeditor.com
2) Go to http://ckeditor.com/download, and download the latest .zip ckeditor file. For example, today, I downloaded ckeditor_4.1.1_full.zip.
Upload the downloaded .zip file into the ckeditor -subdirectory above(Figure-2). Extract the contents(it will extract into another directory named "ckeditor".
Figure#2a: ckeditor_4.1.1_full.zip uploaded into: public_html/cs1/sites/all/modules/ckeditor/ckeditor
Figure#2b: ckeditor_4.1.1_full.zip extracted into another directory named "ckeditor". Note, the uploaded .zip file is in the same directory. We can delete it later.
3) Enable CKEditor from the Modules List:
CKEditor configuration page is now available under Configuration >> Content Authoring >> CKEditor
thats all folks.