The OP is referring to the dropdown shown in the screenshot. It is shown when you have a notification, but will revert to the normal "0 unread messages" if you have none. I have modified my experimental board to always show this. Also disregard the "Unread Hidden Posts" - you will not see this with a default vBulletin.

Understand that. I have vb moods mod in that login user box. Is that why the PM notification drop down window doesnt work for me? What do I need to do to make the drop down window work whilst having vb moods work at the same time??

Thanks.

Disable your moods modification to see if it shows up, if it doesn't, most likely your style has not been updated to the "3.7 level".

Also make sure you actually have a notification (eg. an unread PM), before you start testing.