There is a much simpler, fully supported, and fully legal alternative to client virtualization.

(Note: If BaseSystem.dmg is hidden inside the Lion volume, ensure you have enabled hidden files view by pressing Cmd + Shift + Period )

Scroll through your history to locate Mac OS X Lion and click . Step-by-Step: How to Convert Lion DMG to ISO

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Are you planning a on a blank drive or an upgrade ?

Open Terminal ( Applications > Utilities > Terminal ) and execute the following commands sequentially to isolate the boot image and convert it: