You can enable co-location through the Create New Protection Group Wizard. If DPM supports co-location for the data source you are protecting, the Review Disk Allocation page of the wizard will show you a checkbox that allows you to select co-location. If you have not selected any co-locatable data sources, this option will be grayed out.
Since the data sources now share a volume, they will also share recovery points. Removing the recovery point for any one of the co-located data sources, will mean losing recovery points of the other data sources sharing this volume.
You can look at the size allocated to each volume and the number of data sources co-located on each volume by clicking Modify on the Review Disk Allocation Page. Each row in the table represents one volume. Click Collocated Protection to see the data sources that share that volume.