this is OK
Windows 7 reserves some system space.
You can actually get rid of it -- but if you do you *might* need to do the following or your system will become unbootable.
I prefer having the OS contained COMPLETELY in a single partition so I can make a decent "bare metal" bootable recovery system.
1) go into contol panel ==> administrative tools ==> computer management==disk management.
2) delete the partition
3) expand (either now or after a boot) your 'C' partition to reclaim the space.
If on boot your system fails with a message like bootmgr missing just boot your Windows 7 install DVD and repair system. It should install the boot manager on your "C" partition
To make 100% certainty that the system doesn't create another partition download the GPARTED cd and ensure your "C" partition starts at track 0. GParted -- Download