If you only have one Hard Drive, then you can simply insert your OS CD and chose to format it at the setup screen. If you have more than one, you can can format non OS HD's from inside your OS and then format the remaining one when you load the operating system cd. Make sense?
Floppy disks are inserted into the small drive with a flap over the hole. The end with the metal sleeve usually goes in first, with the side with the circular metal thing pointed down. Though, I have known people who've forcibly inserted said disks otherwise, and proceeded to complain about the floppy mysteriously not working.