How To: Create a Bootable OS X Lion USB Stick
Here’s how you can create a bootable USB Stick (Avoid creating DVD, it’s very slow as we tested)
Follow these steps after you have downloaded the Install Max OS X file from Mac App Store (or from any other source).
Step 1: Go to the downloaded file called “Install Mac OS X” app downloaded via the Mac App Store, right click on the icon and click on “Show Package Contents”.
Step 2: Open folder ‘Content’ > ‘SharedSupport‘. Copy the DMG file to your desktop.
Step 3: Open Disk Utility
Step 4: Insert a 4 GB or more USB Stick to your Mac and Select the USB Stick in Disk Utility. Click on ‘Image‘ button and navigate to your desktop where you earlier copied the DMG file from Step 2.
Step 5: Drag and drop your USB drive to Destination text box and click on Restore button.
Step 6: When restore is complete, Restart your Mac Press and Hold the Alt key after the startup sound. Hold Alt key until you see a bootmenu and select the USB drive to boot.
Done! Your Lion installation will begin now. You can have this USB Stock stored as your backup installation device for OS X 10.7 Lion.