Well, the Recovery partition is there to restore your computer to factory settings. Yes, if you used it, it would return it to the factory setting of Vista.
It is best to just leave this alone, and only format your C: drive when installing Windows 7.
If you were to ever sell the computer, you would likely return it to factory settings, and this partition would facilitate that much easier.
Also, you would likely only gain about 15GB or so of space if you formatted it, as well. To get a better idea of what your drive looks like, go to the Start Menu and type:
and hit Enter. This Disk Management window shows you your drives and partition in detail you cannot get in a regular Windows Explorer window. You would not hurt your computer by deleting this partition when you install 7, but there isn't much to gain.
I don't recommend formatting this Recovery partition, but if you feel like you need the extra space, if is safe to do so. It's your choice.
Enjoy Windows 7!