the camera cannot use XD picture card and multimedia card (MMC). SD and SDHC can be used. for compatibility check this http://www.fujifilm.com/products/digital_cameras/accessories/card/a/
you might need to update your product depending on your serial no.
to format the card, press menu to display menu setup, press right to move to setup 2 (3rd tab) you will see Format. click Format to format the memory ("SD" is displayed if memory card is inserted and "IN" (internal memory) if no memory card. hope this helps