How to format and erase Lion 10.7.3 completely?

Downgrade Lion to Snow Leopard

1. Boot from your Snow Leopard Installer Disc. After the installer loads select your language and click on the Continue button. When the menu bar appears select Disk Utility from the Utilities menu.

2. After DU loads select your hard drive (this is the entry with the mfgr.'s ID and size) from the left side list. Note the SMART status of the drive in DU's status area. If it does not say "Verified" then the drive is failing or has failed and will need replacing. SMART info will not be reported on external drives. Otherwise, click on the Partition tab in the DU main window.

3. Under the Volume Scheme heading set the number of partitions from the drop down menu to one. Set the format type to Mac OS Extended (Journaled.) Click on the Options button, set the partition scheme to GUID then click on the OK button. Click on the Partition button and wait until the process has completed.

4. Quit DU and return to the installer. Install Snow Leopard.

This will erase the whole drive so be sure to backup your files if you don't have a backup already. If you have performed a TM backup using Lion be aware that you cannot restore from that backup in Snow Leopard (see below.) I suggest you make a separate backup using Carbon Copy Cloner 3.4.1.

If you have Snow Leopard Time Machine backups, do a full system restore per #14 in Time Machine - Frequently Asked Questions. If you have subsequent backups from Lion, you can restore newer items selectively, via the "Star Wars" display, per #15 there, but be careful; some Snow Leopard apps may not work with the Lion files.

It is unclear from your post which OS you had when your bought your MacBook Pro - Lion or Snow Leopard?

If it's Snow Leopard and that's what you want, follow Kappy's instructions.

If it's Lion and that's what you want, then simply boot Lion Recovery as it appears you did, but first erase the disk using Disk Utility from the Utilities menu, and then reinstall Lion.