It looks like your Windows Vista installation carried out an upgrade rather than clean installation. As I haven't carried out an XP to Vista upgrade before, I'm not fully sure if there is a way to remove the old Windows XP backup data. Try going into the control panel, into "Programs" and see if there's a listing in there to remove the Windows XP backup data.
When you ran the Vista setup, did you boot the Vista CD or run it from within Windows XP at the time? If you ran it from within Windows XP, it will only carry out an upgrade rather than a clean install.
A low level format is a way of wiping a hard disk completely blank, i.e. to bring it in a like-new blank state.