you need to partition, from existing hard drive, which normally is where the first OS drive live in.
With that empty space being partitioned out and formatted, then can proceed to install the 2nd os into it.
to partition and format the space first before installing, can use the built in partition manager program built in win 7 to do it.
Once done, restart computer with the win 7 boot disk in the cd drive and boot up from there. The comp will go into set up mode and from there, can choose the space partitioned out earlier to install the 2nd win 7.
Anyway, the above is what i have done recently when installing dual win 7 in one laptop. There were few interesting things which i noticed, only when having 2 win 7 bootdrive over my old setup of 2 win xp dual booting choice.
Oh well, that can be saved for later.