From Wired How-To Wiki

The optical disk is dead. Or at least it is for Apple fans. The company had been dropping DVD drives from its latest hardware and its new operating system, OS X 10.7 Lion, is now available in digital form only, via the Mac App Store.

On one hand that's great — upgrading is just a matter of clicking a button and you're done, everything is handled seamlessly behind the scenes.

However, the App Store method means you'll have to be running Snow Leopard (which is the only other OS that supports the App Store), and you'll have to download a nearly 4GB file, which can take quite a while if you haven't got a fast internet connection.

The other problem is that the App Store install doesn't offer the opportunity to do a "clean" install — that is, wipe away your old system and install a fresh copy of Lion. To do a clean install Apple would have you wait until August, when the company will be begin shipping Lion on USB sticks for a whopping $70, more the double the $30 App Store price.

However, despite what Apple says, there are in fact other ways to install Lion. Here's our guide to the various ways of installing Apple's newest OS on your Mac without waiting until August or paying double for the USB stick.

Downloading Lion

The simplest way to install Lion is to download it from the Mac App Store and then run the installer. If your connection is too slow to make a 4 GB download practical, head to your nearest Apple Store which will allow you to download a copy via their speedy wifi connection. It'll still take a while, but at least you can play with fancy new Macs while you wait.

Don't have fast broadband or live near a Mac store? Make friends with someone who has the broadband you need, or be patient and wait several days for Lion to download. Alternately you can wait until August and pay a premium for a USB copy.

Build your own install disk

Just because Apple wants everything to be digital doesn't mean you have to oblige them. In fact it's dead simple to create your own DVD or USB Lion installer. When Lion installs it will create a hidden recovery partition on your harddrive. Should anything ever go wrong with your installation you can always hold down the option key at start up and boot from the emergency partition to re-install Lion.

Given the new hidden disk failsafe, why bother creating an installation disk? Well, you'll need it if you want to do a clean install and it's not a bad thing to have around. If your hard drive fails the hidden partition will fail with it and you'll be stuck downloading Lion again.

Fortunately creating an install disk from the Lion installer is pretty easy. First head to your Applications folder, where you'll see the freshly downloaded Lion installer app. Right-click on the app and select "Show Package Contents." That will open the installer bundle in a new window where you'll see a folder called "SharedSupport." Inside "SharedSupport" there's a disk image called "InstallESD.dmg." The "ESD" bit stands for "Emergency Startup Disk," which is what we'll use to create a new Lion install disk, so copy "InstallESD.dmg" somewhere else.

Now insert your disk — a DVD, a USB stick or an external hard drive will all work — and launch Disk Utility. Select the drive you're using and then click the "Restore" tab. Make sure your backup drive is set as the "Destination," and then just drag and drop the "InstallESD.dmg" into the "Source" box. Click "Restore" and wait for Disk Utility to work it's magic. Once it's done, eject your disk and you're finished. Use that disk as you would any other installation disk.

Over-the-air "clean" install

If something goes catastrophically wrong with your Mac, Apple has a new hidden option in Lion that will allow you to wipe your drive and do a clean install via the internet. That's great for recovery purposes, should something go wrong with your install.

To get to the new options, just start up your Mac holding down command-R and you'll be greeted by a menu that will allow you to restore your system to any point in time from a Time Machine backup, run Disk Utility to check, repair or partition disks and connect to Apple via Safari. That's the hidden recovery partition kicking in.

Lion's so-called Internet Recovery mode lets you start your Mac directly from Apple's Servers, as per Apple's tech note:

Note: If your Mac problem is a little less common — your hard drive has failed or you've installed a hard drive without OS X, for example — Internet Recovery takes over automatically. It downloads and starts Lion Recovery directly from Apple servers over a broadband Internet connection. And your Mac has access to the same Lion Recovery features online. Internet Recovery is built into every newly-released Mac starting with the Mac mini and MacBook Air.

Conclusion

As with in OS upgrade be sure to make complete bootable backups (and test them!) before you begin installing OS X Lion.

Original post by Scott Gilbertson.