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Arduino simulation in Proteus

First thing first, the Ingredients:
(i)  Proteus - ISIS
(ii) Arduino Software - v0017 (this is important, if you are want to run simulation in Proteus then do not download the latest version of Arduino Software)

So, let's begin step by step:
(i)   Run ISIS and make a circuit like this:

      Here are some specifications:
           capacitor = 22pF
           Vcc
           Crystal Oscillator = 16MHz
           Microcontroller = ATMega 328p

(ii)   Double click on micro-processor and change the properties as follows:

(iii)   Now run Arduino 0017 and go to
             File -->  Examples --> Digital --> Blink
        This is just for demonstration, you may write your own code
     

        'Save As' this file and remember the path of directory, you will need it later.

(iv)   Push the 'UPLOAD' button, you will see a couple of errors, ignore them...
        Go to the directory and search for the folder 'applet'
        Here you will find a hex file...that is what you need

(v)   Go back to your micro-controller and burn this file on it, process is simple
              - Double click on Atmel
              - In Properties, you will see a field 'Program File', insert the HEX file here by pressing the folder button right next to it

(vi)   Press Enter and run the simulation....and there you go...a blinking light at PIN 19

Arduino

 To all my dear micro-controller lovers,

           this board here is something that gives you liberty to touch the skies, we all know that engineering is like art where you can build whatever comes in your mind....and this board can be your first "canvas". This is Atmel based board which do not require any extra HEX. burner. 

"Arduino is an open-source electronics prototyping platform based on flexible, easy-to-use hardware and software. It's intended for artists, designers, hobbyists, and anyone interested in creating interactive objects or environments.

Arduino can sense the environment by receiving input from a variety of sensors and can affect its surroundings by controlling lights, motors, and other actuators. The microcontroller on the board is programmed using the Arduino programming language (based on Wiring) and the Arduino development environment (based on Processing). Arduino projects can be stand-alone or they can communicate with software running on a computer (e.g. Flash, Processing, MaxMSP).
The boards can be built by hand or purchased preassembled; the software can be downloaded for free. The hardware reference designs (CAD files) are available under an open-source license, you are free to adapt them to your needs.
Arduino received an Honorary Mention in the Digital Communities section of the 2006 Ars Electronica Prix. The Arduino team is: Massimo Banzi, David Cuartielles, Tom Igoe, Gianluca Martino, and David Mellis. Credits"