Can't install - my disk is used for Time Machine backups

I only have one hard disk. And it has Time Machine turned on. Mountain Lion won't let me install on this disk, saying
"This disk is used for Time Machine backups"
I'm ASSUMING this means that I cannot install ML on a Time Machine disk.
Is this right?
So, do I turn off Time Machine to get ML to install?

I deleted Backups.backupdb.
Now, the ML installer says simply "OS X cannot be installed on <my drive>"
What the ???

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