I have purchased recovery CD's and would like to wipe my system and start over. When I boot to the recovery system disk I get to the point captured in the image.

What is the difference between the 1st and third options.
The 3rd option asks me to "Please delete any data on the hard drive." I would have thought that restoring the computer to factory defaults would comense with erasing all data from the hard disk.
If I select option 3 will I have an opportunity to erase the data within the procedure?
If I have to exit the recovery procedure to erase the data, what is the best way to do so before restoring the system to factory default status?
Thanks.