how do i restore my mac to factory settings,without a CD.i am running lion

Do you mean to the original condition when you bought it? If so, you can't without the original DVDs.

Call Applecare and you can purchase the original system disks that came with your Mac. I think they just charge a shipping and handling fee.

You have a few options.

A) Take it to an apple store and they'll wipe your drive and lay down a Lion image just like it came from the factory.

B) Boot by holding down the Command-R keys, launch disk util, erase the drive and restore Lion. You'll need a fast internet connection for the Lion download (3Gig).

C) Wait for apple to release the USB version of Lion and pay $65 for it.

D) Find a Snow Leopard machine and buy Lion for $30 and copy the download from the /Applications directory to an external USB drive. From there you can "examine contents" to find the .dmg file and either burn it to DVD or use Disk Utilties to "restore" it to an external USB drive partition and boot using Option.