That is the password prompt window which is mislabeled. You actually have to trigger the real new wallet creation wizard to create a new wallet. There are two ways you can do that:
1) Run electrum with the -w switch giving it a path to your new wallet file (which it'll help you create):
electrum -w /path/to/walletfile
2) Another way is to rename the electrum data directory which is one level up from where the wallet file is located:
http://docs.electrum.org/en/latest/faq.html#where-is-my-wallet-file-located
Electrum will notice that you have no wallet file in your data directory and trigger the new wallet creation wizard.
Great, thanks very much.