Apple upset many users with the decision not to release a hard copy of Lion in case of system crashes and hardware failure. It's no surprise then that one user has come up with a solution in the form of Lion Disk Maker - a free tool which creates a Lion recovery disk on a 4GB pen drive.

With it, you can perform a new installation of Lion without the need to download it again from the Apple Mac App Store. This is a big advantage over Apple's recently released Lion Recovery Disk Assistant which doesn't create a hard copy of Lion - it merely creates a partition of Lion on a USB stick. Lion Disk Maker creates a Lion installation file from the Lion DMG file that you originally download from the App Store when you installed it. All you need is a USB stick or external drive of at least 4GB and Lion Disk Maker extracts enough data to create a bootable version of Lion.
Software you need: Lion Disk Maker
Lion Disk Maker is a small application programmed with AppleScript that you can use with Mac OS X 10.6 or 10.7 to burn a DVD or build a bootable USB key from Mac OS X Lion’s Installation programm.
Download the application ( ZIP file, 380 KB).
As soon as you launch the application, it checks the presence of Mac OS X Lion Install in the /Applications folder, or tries to find one using Spotlight. Then, it proposes to build a DVD or create a USB bootable install disk.
To burn the DVD, you’ll need a SuperDrive and a writable DVD (single layer, 4,7 GB). To build a bootable disk, you’ll need a 4GB (minimum) USB or Firewire drive or an SD-Card. WARNING! The whole contents of the drive (including every other volume from this drive) will be erased! Please backup any data on another disk if necessary.
Tutorial: create lion recovery disk
Lion Disk Maker uses Spotlight to automatically scan your Mac for the Lion-installation file. Unlike Apple's official Lion Recovery Disk Assistant all you need is the USB stick to restore Lion - no Internet connection is needed to re-download Lion unlike with Apple's tool.

What if I don't have my Lion DMG file anymore?
No problem. You can simply re-download it from the App Store. Simply go into purchase history and click on OS X Lion while holding the option key to start a new download of Lion. Since you've already paid for it once, you won't be charged for it again.

Lion Disk Maker is an excellent tool that creates a reliable bootable recovery disk for Lion. In contrast to Apple's solution, it's much better because it creates a hard copy of Lion which you can boot your Mac from.
