Yes. The HDD will need to be formatted.
You may allow the AZBox to do this for you, which will result in a Linux ext2 or ext3 format.
You may also connect the HDD to your PC (if you have the appropriate cables) and format it in FAT32.
I prefer to let the AZBox format the HDD the way it wants, but formatting it in FAT32 with your PC would allow the HDD to communicate with any computer with a Windows OS (when hard-wire connected to the PC). That is an advantage if you were to take the HDD out of the AZBox and want to attach it to a Windows OS PC.
If all your PC's are Linux based OS, then you would want the AZBox to format the HDD.
Formatting the drive in Linux has advantages when using the HDD soley in the AZBox.
Either format option is just fine, it all depends upon your personal application... How you intend to use the HDD and what you want to do with it in the future.
RADAR