The install gives you the opportunity to erase it all and install nice and clean -- i don't know if it gives you the option of partitioning, though the manual says that if your drive is partitioned you can install X on one and 9 on the other.
if you have Public Beta on that machine, you'll have to ERASE your drive or you could run into problems due to the previous install. a co-worker of mine installed 4k78 on top of PB and it didn't give him the whole log-in sequence (where you have to put in your name, determine settings, etc)-- in fact, it didn't even ask him to create a user; it just used the previous one.
what the installer does:
it give you an Applications and a separate Applications (Mac OS 9) directory as well as two separate System Folders. Everyone is nice and organized.