I've found that the right-click context menu of Windows Explorer in Windows 7 is a little flakey when you use it with disks (ie, the disks shown in the "Computer" view). If you don't see the "Format" option when you right-click on a drive, right-click on it again and it will probably show up.
If the drive doesn't show up in the "Computer" view of Windows Explorer, then you'll have to use Disk Administrator:
Click "Start" --> right-click "Computer" and select "Manage".
Click "Disk Management" in the left pane.
Scroll down to the BOTTOM of the MIDDLE pane.
You should see your new disk there with a label such as "Disk 1" or "Disk 2", etc. Right-click on the label in order to create a new volume (which partitions the drive) and then...