Question: So if one was needing to reinstall from scratch (such as upgrading the Hard Drive, etc), this would work?

Not sure if you can also reinstall Lion with this but I was able to create a boot disk (Jump Drive) to reinstall should I need to using Lion DiskMaker and it works perfectly. Not sure if I can use Disk Utilities from the Lion DiskMaker one, I'll have to check although you should be able to since all the files are there. However, I was able to upgrade one of my laptops with it.

Yes you can reinstall Lion from scratch. What it does is verify that you are authorized to install it and then downloads a fresh copy to your newly installed hard drive and then installs it from there.

Moral of the story, just save that 10.7 DMG!

@Libertyforall1776

You can't use the DMG install method for new Macs that ship with Lion. Their UDIDs are registered with Apple and trying to install from the DMG will spit out a generic error "Lion cannot be installed on this system". You HAVE to use either this recovery utility, the online recovery method, or the recovery partition. When selected, it connects with Apple's servers and checks if you are authorized to install Lion.

I had a hell of a time swapping out the default hardrive on my new Mini with an SSD and getting Lion on it. After some trial and error, I finally got it.

Called today to verify this was the case with Apple, and yep. All new machines that ship with Lion are registered and that registration is checked at install. Apple isn't using CD-Keys, but a much more advanced system of protection inline with the MAS.

Older systems may likely have the DMG loophole plugged and also require some form of verification (so you can't just share your install DMG).

@cksum Please don’t pass off unverified statements as facts – in my case it made me vow off Apple products and sent me researching your statements. After all FreeBSD is my only alternative left after Microsoft went the activation route and Apple, according to you, won’t even let you load a local copy of the OS. So here is the lowdown:
http://www.ictofficers.co.uk/blog/2011/08/08/apple-osx-restore-offline/
It is possible to load the OS from a local copy on a new MBA.

that's funny ....posting a link to a warez torrent on MU

@cksum: I wonder if you completely reformat the hard drive, including any hidden partitions, if this is still the case. I bet someone wrote an article detailing this new approach of Apple's...