OR: You can upgrade (depending on what OS your currently on) Macintosh HD is the partition or Volume name, It's what your current Operating system is installed on.
If you click erase and format, then everything that was on that drive before, will be gone, and you will have to do a fresh install, and get all of your stuff back.
follow the Apple article about Mac OS X: About the Archive and Install feature. doing this is as close to a fresh install but with loosing your applications and networking settings. It will basic leave the your Home folder almost intact.