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The setting is in Preferences > Output Options > MOBI. There's a drop down control to select whether the default output is the older classic MOBI, the new KF8 or a hybrid. Frankly, I don't remember which is the initial setting.
The same control is in the MOBI section of the conversion dialog when converting to MOBI so that you can override the default on a book by book basis as desired.
Personally, I've set the default to be the old classic MOBI. I only override this when a particular book's formatting will be better if I select KF8 or the hybrid (my usual second choice.) The hybrids are twice the size, typically, and sometimes even larger. I don't have a space problem on either my K3 or my PC's HD and I almost always transfer via USB so I don't bother with creating KF8 only files. Only in the rare case of loading the files by emailing them to my Kindle will cause me to create a KF8 only file.
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