This error is a result of having your hard drive formatted in an old (Pre-XP) fashion. You can either convert your filesystem to NTFS or install PostgreSQL on your system as is.
If you wish to install PostgreSQL on a non-NTFS filesystem, please restart the installation process, but uncheck "initialize database" when you see that checkbox. Installation should now finish normally. Once installation is complete, click Start --> Run, type in "cmd" and hit enter. At the command prompt type:
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cd "C:\Program Files\PostgreSQL\8.3\bin"
Note: Those quotes are necessary. Then hit enter. Then type:
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initdb -A trust -D "../data" -U postgres
Note: Those quotes are also necessary. Then hit enter. Close the command prompt when the command finishes, then click Start --> Programs --> PostgreSQL --> Stop Service followed by Start --> Programs --> PostgreSQL --> Start Service. PostgreSQL is now installed and should be running properly
If you wish to convert your filesystem to NTFS, backup any and all critical files. The conversion tool should be seamless, but in case of a power outage or other interruption in the process you may be unable to recover your system. You should back up any and all critical files before continuing. Click Start --> Run, hit enter, type "cmd" and hit enter again. This will bring up a command prompt. At the command prompt, type the following, where drive letter is the drive that you want to convert:
convert drive letter: /fs:ntfs
For example: convert E: /fs:ntfs
When prompted, enter a drive label (or name) for the drive. You may name the drive as you feel is appropriate. When the conversion is finished, exit the command prompt. You can now proceed to install PokerTracker 3 with PostgreSQL normally.