IMac with 8.1 software..Problems updating!

So..I took this old IMac (blue TV look alike) from storage today and need to update the software.
The version on it is Mac OS 8.1...
I tried to put a Mac OS X install disk 10.4.2 version and also a 10.3 verson and it didn't work...It says :

- This disk in unreadable by this computer.
Do you want to initialize the disk?

the little screen gives me 2 options : "Eject" or "Initialize"

When I click initialize it says it's going to destroy all info in the disks...
When I say yes the operation gets denied saying "Initialization failed, disk is locked" so the CD is ejected!

Any help?