When you install Mac OS X 10.7 Lion, or buy a current Mac, one of the things that happens is that 650 MB of your drive space is set aside into a “recovery partition”. You can use command-R, or the option key, during startup and your Mac will be able to start from there.

The Recovery Partition is a lot like the Lion USB stick (or DVD if you made one yourself from the Mac App Store download), without the actual Lion installer. Both, when you boot from them, let you run Disk Utility, restore from Time Machine, and other stuff, including installing Lion, of course. However, when you install Lion when booted from the recovery partition, it downloads the actual Lion install disk image — same as the one you would burn to a DVD in the above link — to your target drive, along with something to make that image mount when the machine reboots. If your Mac requires a special build of Lion (like the MacBook Air 2011), it grabs that version rather than the standard one.

If you want to keep the disk image file, so you can burn it to a DVD or restore it to a flash drive, boot from the Recovery Partition, target an external drive for the Lion installation, and remove the external drive as soon as the machine reboots. It will be in a folder called Mac OS X Install Data (this may be invisible in the Finder, I can’t remember; if you don’t see it, from the root of your external drive, try Go To Folder… in the Finder’s Go menu and type “Mac OS X Install Data”).

Apple has also provided a tool which essentially block-copies your Recovery Partition, same as you would using Restore in Disk Utility, to a USB drive — not a bad thing to have around if your Recovery Partition doesn’t work one day. Here it is: Lion Recovery Disk Assistant

The stone lion image is by libraryun, courtesy Flickr Creative Commons.