Windows sucks at managing hard drive partitions. Really badly.
You will need to download an Ubuntu Linux iso and either burn it to a dvd or make a bootable usb drive out of it. Then use gparted to format that unallocated space.
If you want to merge that into one drive, you can also do that from gparted (using the re-size button).
However if you make on big drive out of it you will need a windows 7 repair cd (Windows doesn't like it when you change the drive it's installed on) and plenty of time. Shrinking and expanding partitions without losing data takes a long time.
Next time you install Windows on a new drive, it's a good idea to just format the whole thing in gparted before doing ANYTHING to avoid stuff like this.