I have windows 7 64 bit Home premium version installed on my Laptop.
I wanted to try out the Windows 8 release preview. I also do not want to lose windows 7.

So i have followed the following steps:
1.Created a Partition on the Hard disk by shrinking the volume of existing partition.
2.Downloaded the iso image (64 bit) of windows 8 release preview.
3.Created a bootable USB flash disk from the iso image by using a small software provided on the microsoft website.
4.Changed the boot order of my machine so that it first boots from flash disk and then from hard disk.
5.Connected the flash disk to system and restarted.
6.System booted to flash disk and a black screen with "Windows" written on it appeared.
7.Next, a blank sky blue color screen appeared. It has got nothing in it, It was totally blank. ONly the cursor was visible and nothing else.
8. After waiting for an hour, nothing happened. So i have disconnected flash disk and restarted my system.

This is my problem:
During restart, everytime a black screen comes with two options:
1. Windows 8 setup
2. Windows 7

If i select option1, it again goes and stays idle at that blue screen. I want either windows 8 release preview to be installed or this choice screen during every boot has to go. Can someone please help me?

It looks like the bootable drive might be corrupted. I would suggest you to create a new bootable USB drive and then try to perform a clean installation from that bootable drive.

Refer these links to know more about Windows 8 and to download ISO file.
Windows 8 Release Preview: Frequently asked questions
Windows 8 Release Preview ISO images
Windows 7 USB/DVD download tool