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I've installed Virtual Box and am trying to install Ubuntu 12.04 from a downloaded ISO. Everything is going fine but I come to a choice that says no operating system is dectected on this machine, what would you like to do? 1)Erase disk and install Ubuntu (this will erase any files on the disk) or 2) Something else (choose partition size, multiple partitions, etc).

Does the first option mean erase all files on the VIRTUAL DISK--NOT THE COMPUTER? Is it just talking about the virtual machine or if I select this option will it erase my Windows operating system and other files on my hard drive?

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It means that it will erase all files on the virtual disk, and not the host. It doesn't affect the host Operating System. I would recommend choosing the first option. If you would like more help, or information on how to accomplish you task, then See this site

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Thanks! So that means that it'll delete everything on that virtual machine right? So for example, if I'm using VirtualBox and have multiple virtual machines, it won't affect the other ones correct? – ocean800 Jan 17 at 5:58
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That is correct. So if you have an Ubuntu VM, and Windows VM, and you delete the Windows VM, that will not affect the Ubuntu VM. – Mitch Jan 17 at 7:28

If you would like further confirmation about the environment you are working in, you can also boot your live CD inside the VM using Try Ubuntu. Then start either Disk Utility or gparted. You will then be able to see which disks the install would be working with and what is or, more likely, what is not on them.

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If you choose the custom option, you will see that the disk name should be VBOX SATA. This is the virtual disk - your host system disk is not visible from inside the virtual machine.

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