Try adding adb's folder (platform-tools) to your PATH. The adb executable used to be in the tools folder on versions of the SDK up to v8 IIRC, but it was moved in v9, so ddms.bat is probably looking for it in the wrong spot.
See also this thread on StackOverflow (accepted answer there courtesy one of our mods here) to see if this is in fact the issue.
Edit: If you need it, here's a decent guide for changing your PATH environment variable. It's written for XP but I don't think the process is much different (if at all) for Vista/7. The basic premise is at least the same.
Another edit: It looks like it's the same process according to this guide for Win7.