This wizard helps you creating a new Report; you specifies here its name and label, and moreover the project and package where it will be saved.
In the 'Navigator' view of the 'Design' perspective, you will see that the packages represent the branches of your projects. Each package contains its own instances.
So naming a package after a library is be a good idea. To reflect the library hierarchy, you can enter the library names (starting from the highest-level library), and separate each with a period (ex: 'COM.CIF') . This way, the 'Navigator' view will display a first-level branch, COM, with its instances, and a second-level branch, CIF, with its own instances.
A project represents the physical distribution of your instances in your workspace. There can be various projects for each location (a location is the equivalent of a database).