Windows 7 - formatting, allocation unit size?

what is allocation unit size,
and
how do u select one?

Allocation unit size is the smallest amount of disk space that can be allocated to hold a file. Also called cluster size. To explain, if the file is 1k in size and the cluster size is 4k, the 1k file will still be allocated 4k. So the larger the cluster size, theoretically more the space wasted. As for your question, just choose the default allocation size, let windows worry about it.