Lion DiskMaker is an application for OS X 10.6 and 10.7 machines that can be used to create a bootable USB drive to install Lion on your computer. If you’ve ever used Unetbootin, the concept is very similar. To install, just plug your drive in, make sure you have Lion downloaded from the App Store to ~/Applications (Macs with Lion preinstalled, such as the new MacBook Air, will not work), and run the utility. If you upgraded from 10.6 to 10.7 the Lion image is deleted automatically, so you’ll have to re-download it from the MAS by holding down the option key while on the “Purchased” page.
There are other ways to create a bootable flash drive which involve the command lion and Disk Utility, but Lion DiskMaker simplifies the process significantly. Apple is asking $69 for a ready-to-go Lion flash drive, but it’s much cheaper to roll one yourself.