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Please change the headline. Lion Recovery is awesome, but in August, you'll be able to buy Lion on a USB stick for $69. http://www.apple.com/pr/library/2011/07/20Mac-OS-X-Lion-Avai...

edit: thank you

Done.

Interesting that the USB stick version is so much more, I assume it's really only for those upgrading from pre 10.6, so it's similar to the cost of Snow Leopard + Lion + cost of media

Or those with high bandwidth costs. While $40 might be more expensive than a single download, if you know multiple Mac users in an area with small caps it might make sense to split one of these.

I'm curious how (/if) the license ties in to the App store. Hopefully they don't make you tie it to a single account once your computer is running.

More likely it's a signal that the USB option is not the preferred upgrade mechanism. Apple wants to push every possible user to the App Store, and it's only extenuating circumstances that are forcing them to offer the USB stick at all.
"Internet Recovery. Help is everywhere.

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."

Anyone wanna guess how that mechanism works? Micro kernel on some internal flash memory?

It must be something small like that, nothing stored on the HD. I wonder if it pulls down enough to create a recovery partition and then boots into that?
"...or you’ve installed a hard drive without OS X, for example — Internet Recovery takes over automatically"

Could a dual boot system (Lion + Ubuntu) be confused with "hard drive without OS X" and be taken over by the Lion Recovery automatically?

Hope this doesn't means that only OS X should be installed in a Mac.

I doubt it, since Boot Camp is a native OS X feature.
Boot Camp only allows for one other OS. Back when I tri-booted, I had to do it all manually (and use refit). Boot Camp had no idea what was going on.
I'd imagine they're targeting more the situation of "I bought a new, blank hard drive".
(comment deleted)
I'm not sure if this is anything different from the Recovery partition that Lion installs on all Macs. If it's the same thing, there's basically just a small partition with a very minimal OS X install that you can boot into if your main system is hosed to reinstall the system software from Apple's servers.
I'm not sure who's down-voting you, but your answer is correct. It is indeed the recovery partition. It includes a compressed lion system tree with Safari.
it should not: "your hard drive has failed or you’ve installed a hard drive without OS X, for example ". I know apple is deceiving, but I can't guess how they would install a recovery partition a new "drive without osx".
Ah, thank you for calling my attention to that. I had somehow read it to mean "If your boot partition is hosed."
It is not. The page states it works with a blank drive. It is built into the EFI firmware.
I'd imagine Internet Recovery is simply an EFI application stored in the Mac's firmware, and that the app itself is an extension of the pre-existing NetBoot/NetInstall concept that supports http and does some machine and dmg verification.
It probably works the same way that WANboot works on Sun/Oracle SPARC machines:

http://download.oracle.com/docs/cd/E19683-01/817-5768/wanboo...

There's just enough code to initialize the network interface/s, grab an IP, and download a file from an HTTP/S server. Once the file is downloaded, it's executed and you have the beginnings of a bootstrap procedure for your OS installer.

WANbooting has been around for almost ten years now, so the idea isn't that new.

This was probably even technically possible with PowerPC machines, as they used OpenBoot firmware just like Sun SPARC machines did. I guess they wrote the EFI code necessary to do the same thing.

It's Apple, so I would assume... fairies?
This is cool. Mac OS X is really moving away from dependence on having an optical drive or any other external. I have and SSD instead of optical and it's a nightmare to disk first aid or re-install os x.
You can (at least since 10.6) just copy the disk image to a USB drive and install from that.
"network connection required" is still an external to me. I guess also that it's going to require a wired network connection - or have they really incorporated a wifi detect-select-and-password system into the internet recovery version?

While it's convenient for certain unusual situations, I'd rather have a USB stick than internet recovery, simply for speed reasons.

Wifi selection and authentication in the bootloader was already part of the old Macbook Air. So I'm sure it works here too.
Is that the bootloader on the disk, or a chip on the board?
In the firmware, not the disk.
This is slick, my only problem with it is that Lion is a huge download. It's bad enough waiting on fresh OS installs, but waiting on a download and install would knock the wind out of my sails. I'll be buying the USB stick.
USB drives come out next month. Won't your download finish before then? :)
I don't think the boot version contains the full download. I'm guessing it contains just enough to start the restore.
On a related note, does Lion delete its own installer once you install it? I don't want to have to download Lion on all of my machines separately, seems as if I should be able to buy it once from the App Store then copy it (does the OS have the same license rules as apps, i.e. n copies? I'm not looking to pirate anything, just want to save download time)
The installer only deletes itself if it's still in /Applications. Copy it to a different partition before you run it.
I'm not sure if it removes it after installing, but you can probably just copy it to another drive beforehand if you're concerned.

If authentication is handled like other App Store software, you may have to enter your apple ID and password to run it after it's copied, but there shouldn't be a limit on the number of computers.

They say if you open the installer folder, you can see the disk image. Hint hint.