yes, right click the website and select "add application" and create it there - please note if you root website is an asp.net website then you will have to disable inheritance (web.config files are hierarchial) - see http://stackoverflow.com/questions/7339029/dotnetnuke-and-custom-development for an example on how to disable.

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Install DNN in a directory other than your default. I prefer using a directory on a drive other than C: in a folder called Sites which contains all the multihomed sites on my server.

Open IIS Manager
Open Application Pool
Action, New, Application Pool
Give the Application Pool a name consistent with your new site
Open Web Sites
Action, New Web Site
Enter Description (I tend to use domain of new site), Next
Enter the Host Header (domain that will point to this site), Next
Browse to the path of the DNN install, Next
Permissions to check are Read, Run scripts, Next
Open the properties for the new site
Select the Home Directory tab,
Change the Application from Default Application to something meaningful
Change the Application Pool to the one you created above.
Select the Documents tab
Add default.aspx and move it to the top
Click on the ASP.NET tab end ensure that the appropriate version is selected.
You should now be able to navigate to the new site and kick of the install that builds the database, etc.

Hope this helps ... I have multiple versions of DNN running on a machine with multiple sites. You can also point several sites at the same DNN directory and just have different portals responding to the different sites. One suggestion is NEVER EVER EVER create anything in the default portal 0. I create a throwaway domain for it like dnn.yourdomain.com or portal.yourdomain.com. That way if you screw up something you're doing in a portal and want to delete and start over again, you're not deleting the DNN install.

Warm regards,
Bob