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So its best to have your steam installed on the drive where you keep your games on
Yes - ie. not on the Windows partition.

or can you select where your games are installed??
No, you can choose where the whole Steam folder goes, but all your Steam games have to be in that folder, they can't be put in different locations.
 
So what happens when you come to reinstall windows??
You can also backup your steam games to DVD-R if you wanted....;)

steam-2.png
 
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