Time Machine was never set up
Your iMac has only a single disk in it, and that is the one you will be backing up. You cannot use the same disk to back up to. You need to get an external device to hold the backup data: either an external disk (that connects to your iMac via USB, FireWire, or Thunderbolt), or an Apple Time Capsule appliance (which also acts as a wireless network router). Once you have one of these, and it is connected to your iMac, you should be able to select System Preferences -> Time Machine pane, after you switch Time Machine on.