You have to remove the NTFS format. This will require running FDISK as duffy90210 mentioned. When you run FDISK you can accept the first screen. At the FDISK menu select the option to Delete Partitions. Then select the option to Delete Non-DOS partitions. This will enable you to get rid of the NTFS partition currently on your system. But be careful. If the laptop has a small partition listed that houses the BIOS Setup don't delete it too. That is a common mistake and can affect accessing the BIOS. Once you have deleted the Non-DOS partition then press ESC and back at the FDISK Menu select the option to Create Partitions. Create a Primary Partition. Press ESC to exit FDISK. Leave the floppy in the drive and restart the computer. At the Command prompt type FORMAT C: and that should give you a new partition, freshly formatted as FAT32 that you can install Windows 98 on.
You should also ensure that you've visited the IBM site to see if you need Windows 98 drivers for the laptop's hardware.