Percussion Mode: Turn dial to the right until percussion (hammering motion) engages. Light will be solid in this mode.
Vibration Mode: Turn dial on (just a click) keeping it at "0" speed position until light blinks (3 seconds). Then turn dial to the right to increase intensity. Only one motor will engage at a time. If percussion engages first, try again by turning off and on again.
Also refer to this video How To turn on Vibration & Percussion Mode for CM7