Did you click on Custom Install ? ...
7. Select the hard drive or partition that you want to install Windows 7 on, and click on the Drive Options (advanced) link. (See screenshot below)
NOTE: If the hard drive or partition that you have selected is unallocated, then you can just click on the Next button instead and go to step 9 since it is already empty.
WARNING: You may not have the Drive options (advanced) option unless the installation is done at boot, and not running the installation from within your current OS.