Mountain Lion OS X Installation problem

I am running a I-Mac with OS 10.6.8, and purchased a OS Mountain Lion OS X. I get a window asking me to "select the disk where you want to install OS X, and I would like to put in on my I-Mac hard drive HD. I get a message that "This disk cannot be used to start up your computer." What I want is to replace the present system with the new one, but seem to be too dumb to figure out how to make it happen. Thanks in advance for any ideas!