Ubuntu need at least 2 partitions to work nicely. You can shrink sda5 (D:) in Windows 7 and leave the empty space "Unallocated" and unformatted.
You should use Windows internal tools to defragment and then shrink or resize the D:. See http://technet.microsoft.com/en-us/magazine/gg309169.aspx . and http://www.techrepublic.com/blog/window-on-windows/quick-tip-shrink-a-hard-drive-volume-in-windows-7/3616 for detailed steps. Remember, do not create a new partition in the empty space. Leave it unallocated.
Ubuntu installation will then find the unallocated space and create sda6 (
/) and sda7 (
Swap) there during a "side by side" installation.
Ubuntu (and Linux in general) do not use C:, D: etc. to identify partitions. Partitions are mounted at various
mount points that can be a folder or a directory. An important mount point is root denoted by
/. This is the rough equivalent of
C:\ where the OS will get installed. Other partitions are mounted to folders within
/. By default
/home is a folder in
/ in Ubuntu. However, one can devote a separate partition to
/home by mounting the partition, say
/dev/sda8, to that folder. In that case all sub-folders of /home will be in the partition dedicated to it.
Note: the Swap partition has its own format and no mount point, as it is not accessed by the user directly.
See I have formatted a 55gb partition hard drive for UBUNTU. How do I install it on that partition? and Dual Boot Installation with Win7 - Install Ubuntu in New Partition.
Hore general instructions for installation is at: How do I install Ubuntu?.
Hope this helps