There are more than a couple of mistakes in the code.
Since you have not defined any default values for any of the function arguments, it is necessary to pass both arguments while calling the function --> hello(sys.argv[2], sys.argv[2])
import sys
def hello(a,b):
print ("hello and that's your sum:")
sum=float(a)+float(b)
print (sum)
if __name__ == "__main__":
hello(sys.argv[1], sys.argv[2])
Also, using "C:\Python27>hello 1 1" to run the code looks fine but you have to make sure that the file is in one of the directories that Python knows about (PATH env variable). So, please use the full path to validate the code. Something like:
C:\Python34>python C:\Users\pranayk\Desktop\hello.py 1 1