Ubuntu on a virtual machine

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http://askubuntu.com – I've installed Virtual Box and am trying to install Ubuntu 12.04 from a downloaded ISO. Everything is going fine but I come to a choice that says no operating system is dectected on this machine, what would you like to do? 1)Erase disk and install Ubuntu (this will erase any files on the disk) or 2) Something else (choose partition size, multiple partitions, etc). Does the first option mean erase all files on the VIRTUAL DISK--NOT THE COMPUTER? Is it just talking about the virtual machine or if I select this option will it erase my Windows operating system and other files on my hard drive? (HowTos)