You wanted to install the Mac OS X in the disk that has been used for the backing up the time machine files but when you do that you get the error disk is used for time machine backups. This situation generally occurs when the main hard drive is not responding or giving any trouble while booting, there can also be other reasons. You might have been used the disk for backing up the files but now you don't need it for that purpose. The disk is used for time machine backups message can be removed first you will have to transfer all the backup files from it to nay other drive then you can go to the preferences of the time machine and turn it off. Now you have to delete the Backups.backupdb file from the drive and then it will be ready to use. However you will not be protected from data loss so in that case you should use the Mac data recovery software which will help you to make the restore the files that you have lost. You can make easy recovery with the help of that so get rid of disk is used for time machine backups message and recover your data by downloading the software.