How to inform users that his browser is not supported

IE supports conditional comments, which is kind of weird, but it will work in this case. You can do something like this:

<!--[if IE]> Get a better browser! <![endif]-->

To any other browser (FF, chrome, safari, etc.) This will just look like a normal HTML comment and will be ignored, however IE will actually evaluate the statement and render what you ask it to.

Edit: Check the MSDN article on conditional comments for more information. This feature has been around since IE 5, so it's pretty safe and reliable to use.

1) Do you support a gracefully reduced subset of functionality on IE?

If so, pop up a warning message the first time the user sees the app, stating that due to technical limitation of Internet Explorer software, the app's functionality is reduced

if not, display an explicit error page stating that another browser is needed.

2) Do your potential users have a great level of trust in you?

if Joe Schmoe web page comes in and tells me to install XXX, I will tell that web page "no".

So the best approach is to link to some TRUSTED web source explaining non-IE browsers and how to install them, either instead of in addition to your own instructions.

Well although i don't recommend you to do this display them this image:

_{(source: gosquared.com)}

and say "Instead of wasting time with IE, we choose to ......." (get things done etc...)

And provide few web browser download link. Do not provide many, people can get confused.

Also you can provide some links such as: http://stopie.wordpress.com/