Cannot upgrade OS X?

I have Snow leopard on a flash drive and have tried booting directly from the computer and also from the start up menu holding down the "alt" button. I chose startup from mac os x drive and it just kept loading with a "block" symbol. I also tried loading lion the same way on a external hard drive directly and from startup and I can't pick the MAC HD as the install location?

I just tried them before I wiped my hard drive completely and set it to factory settings with the original disk, and they gave me no problems. Now that everything is on factory setting I can't seem to do any of the two.

When I tried installing Snow directly from the computer I get this, "The application "Install Mac OS X" cannot be used from this volume.

and when trying to install from a DMG file i get, "You cannot use this version of the application Install Mac OS X Lion with this version of Mac OS X"

I don't know what else to do? Help me please!!!