Usually, Ubuntu's installer gives you the option to shrink your Windows partition and install alongside it. In your case, that option did not appear. This sometimes happens, and possible causes include:
- Windows was hibernated rather then shut down.
- Windows was not properly shut down. (Perhaps there was a power failure, or it bluescreened last time it ran?)
- The Windows partition is damaged, and should be fixed with
chkdsk in Windows.
- The Windows partition is too full to be shrunk.
- The Windows partition cannot be shrunk because the files in it are too badly fragmented, preventing them from being constrained to exist only within the new boundaries.
- The Windows partition cannot be shrunk because of immovable files near the boundary.
Since you're running Windows 7 (this also applies to Windows Vista, and to the corresponding Server versions, and will apply to Windows 8 as well), you can try to shrink the Windows partition using Windows, and then try again to install Ubuntu.
To do this, right click My Computer (sometimes just Computer) on the desktop or Start Menu in Windows and click Manage. Go to Disk Management.
diskmgmt.msc into the text box in the Start Menu and press enter.)
Then you can use Disk Management to attempt to shrink your Windows partition. It will schedule the operation for when the system is shut down, so that even files that are in use when the system is running can be moved.
However, system files marked immovable still usually will not be moved in this way. So you may need to disable hibernation, and even disable swap (i.e., the page file), in order to make this succeed. (You can re-enable them afterwards.)
As Mitch says, it's advisable to ensure all backups of documents and other important files are current, before dynamically resizing a partition (no matter how you do it).