Open the Control Panel, click Change input methods
Click Add a Language
Select Chinese Simplified
Return back to the language options, and click on Options next to Chinese.
Click Add an input method
Select Microsoft Pinyin
Typing Chinese using Pinyin
In the tray, you can change typing mode.
Type pinyin, and select the characters as you type.
What native Chinese people actually do:
Most people who live in mainland China typically install a 3rd-party input method. Google Pinyin Input is very popular.
The Google input method has advantages:
It is partially cloud based, and will add new words as they become common in Chinese.
It is a bit smarter, and learns from what you type. For instance, if your home address uses a rare Chinese character, it will learn this and make it a top suggestion, rather than having to frequently scroll through lists of characters