If you are configuring Centralized backup, you will need to convert the file system. If you are backing up only a single PC, you do not need to convert, though it is recommended.
The Volume Label of the partition (the drive) can be found by right clicking the drive letter in Windows Explorer.
This article explains the process:
http://support.microsoft.com/default.aspx/kb/314097-steve
Microsoft MVP Windows Live / Windows Live OneCare & Live Mesh Forum Moderator