Change from subdirectories to subdomains

I just installed MU I received a message during installation that my subsites would have to be sub-domains. When I try to create a subsite it is created as a directory i.e, 1. How can I change this MU install to accept the directory format instead of a subdomain format.

Currently I only have the main site which is being included as a subsite, but is the original site I created before activating MU.