Depends on the OS, win 98 does it while in dos, win2k doesn't "use" dos, formats from the cd as you load the OS. Which OS are you trying to load?
If it's win98 (or 3.1, 95, etc) you boot from the floppy and at a: (prompt) type "format c:" --without the quotation marks. This will run the format for you. If you want to partition, at a: (prompt) type "fdisk" -w/o quotation marks. This will show you your partitions (if you have any) and let you partition your drive.
You can set the partition for as large as you want (up to max of hd), or setup several different partitions on the drive which will give you several "drives" to use. You can also use 3rd party software, such as partition magic, to change the size (or create new ones) after you've loaded the OS.