You need to download at least one of the "essential SDK components" into your development environment:
http://developer.android.com/sdk/installing.html
Download one of the "SDK Platform Android" 1.* or 2.* from the Android SDK and AVD Manager (located on the toolbar towards the left - has a picture of a little Android guy with a down arrow). Once you have one of the platforms installed you will have a Build Target available in the list. I would just go ahead and download any available SDKs that you see in the under "Available".