put the CD into the computer and reboot (or it should come up in a window when put in and open the install mac os X with a message saying click restart to install) when it boots goto the menu at the top after selecting the language
on one of the Utilities drop down menus there is disk utility
open that and format the HDD then close the disk utility and continue with the install of MAC os X
and of course documentation from apple for disk utility
http://docs.info.apple.com/article.html?artnum=301170
also more helpful documentation
http://docs.info.apple.com/article.html?artnum=303124
http://docs.info.apple.com/article.html?artnum=106692
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