Just a little terminology clear-up. "Format" is a particular term for the operation of installing a File System on a hard drive and clearing out old data. What I believe you are trying to do here is not a Format. You are trying to Install a new version of Windows to replace an old version. The process actually WILL do a Format operation as part of its work.
Before going further, let me be sure you understand something important. This operation will completely wipe out ALL the old stuff on that hard drive. You will NOT be able to recover or use any of its old data. So, if you need to save anything on it, you MUST copy it to some other storage device first.
Next, a general hint for installing Win 7. When you do the Install, make sure there is ONLY the hard drive you are installing to connected inside your case. NO other hard drive should be connected during the Install process. This is a trick to force Win 7 Install to do a part of its job in a particular way so that it will not risk causing you an obscure problem later. AFTER you have Win 7 Installed and running, if you have any other hard drives you can shut down and re-connect them. When you re-start, Win 7 should discover the new drives and make them available.
Now, that message "boot from the installation media" means that it wants you to set up your system so that it boots and runs from the Win 7 Install CD. You cannot run a Win Install from inside an old version of Windows. This requires that you use part of BIOS Setup to make an adjustment to your machine. Follow this sequence:
1. Place the Win 7 Install CD in your optical drive and close it.
2. Re-start your machine, but do not wait for it to boot normally. As soon as it starts up, hold down the "Del" key, until the screen stops changing and shows you the opening screen of BIOS Setup. On most machines, this will work. On a few, the key to use is not "Del" but something else. So as this is going on, watch the screen for a message about what key to push to "Enter Setup". If it says to use something other than "Del", remember that and shut down and start again, using that key instead.
3. On the opening screen of BIOS Setup, look around a bit. Usually on the right or along the bottom are a few prompts about which keys will do what, like moving the cursor or making a choice. Usually across the top are some menu page names, and you can move from one to another with the cursor keys. Look for the page where you can specify the priority sequence for devices to boot from. You should set it so that your machine will try the optical drive unit as its first boot device, and then try next the hard dive you have installed. There does not need to be any other boot device. Once those choices are set, use the appropriate keys to SAVE and EXIT from here. Your choices will be saved permanently and the machine will reboot now.
4. Since you just told it to, the machine will boot from the Win 7 Install CD in your optical drive. It will examine your machine and give you some choices. Your first step should be to use the menus to go to the hard drive and Delete any and all Partitions it has so that it is blank and ready for the new Install.
5. Now you can set up the Install plan. Many things will be set by default to the right choices. But just check them. You want Win 7 to be installed on your only hard drive in the machine right now. I presume you will want it to use ALL of the space available on that unit. It will plan to use the NTFS File System and to use a Full Format, which is all good. When the settings are all OK, tell it to proceed. The process will take a long time, so just be patient and do something else.
6. Eventually it will complete the preparation phase and start actually copying files onto the hard drive. You may have to make a few choices or take a couple of actions in this latter phase.
7. When the Install is all finished the machine will reboot into Win 7. At this point you can remove the Install CD and reboot. Note that, if you watch carefully, the machine will check the optical drive unit first, find it empty, and skip right away to the hard drive to boot from.
8. As I said earlier, IF you have other hard drives to use in your machine, now is the time to shut it down and reconnect them. When you reboot, Win 7 should find them and show them to you, ready to use in My Computer.