Blog Address fo new blog

I have set up wpmu but now I want to add a new blog and I am looking in Site Admin > Blogs and in the Add BLog section it appears that I can only add sub domains not directory type blogs. (ie blogname.mydomain.com)

I would like to add mydomain.com/blogname instead.

Is there a setting I have overlooked somewhere?

Kindest Regards
Craig Edmonds