It seems to be a bug with the update.
READ ALL THIS. IT WILL SAVE YOUR COMPUTER. YOU WILL NOT LOSE ANY FILES AND DO NOT HAVE TO RESORT TO A TIME MACHINE BACKUP IF YOU PROPERLY PURCHASED LION!!!!!!!!!!!!!!!!!
Sorry for grammer...typing fast
Assuming that you have properly purchased OS X Lion...
IF YOU ARE FAMILIAR WITH MAC
!) shut down laptop
2) Hold down option key and restart computer
3) Choose Recovery HD from the boot menu
4) Make sure Wifi is on, and connected to internet
5) Choose Reinstall OS X Lion from the Recovery Utility Menu
At this point, your computer is going to attempt to contact apple and download an eariler version of Lion. I tried doing this, but it wasnt able to make a connection, and ened up saying close the application and try again. Dont waste your time here...move on
IF YOU HAVE A RECENT TIME MACHINE BACKUP
-follow the steps above except obviously choose restore from time machine backup
IF YOU HAVE A COUPLE FILES YOU WANTED TO SAVE SINCE THAT LAST BACKUP
-you will need another Mac to save them and a firewire 800-firewire 800 cable
1) turn of the broken laptop
2) Plug firewire from broken laptop to working laptop
3) turn on working latop and open finder
4) hold down the "T" key on the broken one and start it
5) you should see a grey screen with a battery indicator and a firewire logo floating on the screen
6) in finder on the working computer, you should now see the harddrive of your old computer, drag the files you want to the new one and restore to a backup with the steps above
IF YOU HAVE AN OS X LION CD-ROM
1) Turn off computer
2) Insert Lion install disk
3) Start up computer while holding Option key
4) Release option key when several hard drive icons appear
5) Click the arrow below the CD-ROM icon
6) From the list of tasks in the Recovery Utility window, choose Reinstall OS X Lion. This option will NOT touch any of your files, it will only strip the OS and replace it.
IF YOU HAVE ANOTHER LAPTOP
1) On the working laptop, navigate to the App Store, and Sign in
2) Search for OS X Lion in the app store
3) If you correctly purchased the Lion upgrade originally, you should be able to click the "Download" button next to the Lion photo. ALTERNATIVELY you can click "purchases" in the app store, and navigate to the Install Lion app, and then click download from there
4) When Lion installs, conduct a Spotlight search (very far upper right hand corner of your screen magnifing glass) for "Install Mac OS X Lion" and choose "reveal items in finder"
5) right click on the Install Mac OS X Lion app (the one with the lion picture)
6) Choose "show package contents"
7) Open "contents"
8) Open "shared support"
9) In the spot light search, no type "disk utility"
10) in shared support, drag "InstallESD.dmg" to some blank white space in the left hand box of the Disk Utility window (the correct box probably says something like "500.11 GB ST90546500" on the first line, and "MAC HD" on the second line.)
11) Right click on the "InstallESD.dmg" in the disk utility box (the location you just dragged to) and right click it and choose "Open Disk Image"
12) insert a free USB thumbdrive (CAUTION. if you do not know how to create a new partition [[[5GB REQUIRED FOR THIS STEP]]] then everything MAY be wiped from this drive)
13) Your new drive should show up in black in disk utility. If it shows up grey, click on it and in the erase tab of Disk Utiliy, make sure you choose MAC OS JOURNALED from the drop down menu and click erase
14) In disk utility, click on the drive listed below "InstallESD.dmg" should be called "Mac OS X Install ESD"
15) In the restore tab, you should see "Mac OS X Install ESD" in the source tab
16) Drag your USB flash drive from the left hand box of disk utility to the "destination" text box
17) Click restore. It should take about 15-20 minutes. once done, eject the flash drive and plug it in to your broken computer
18) Start the borken one and hold down option
19) you should now see at least these three options come up on a grey screen MAC HD (harddrive icon), RECOVERY HD (harddrive icon), and MAC OS X INSTALL ESD (usb icon)
20) Choose MAC OS X INSTALL ESD
21) choose install a version of lion from the recovery utility menu
22) THIS IS DIFFERENT THAN THE FIRST SET OF STEPS I LISTED. ONCE YOU BOOT FROM THAT FLASH DRIVE, IT WILL NOW TRY TO FIND THE LION OS FROM YOUR DRIVE WITHOUT ATTEMPTING TO CONTACT APPLE FROM THE INTERNET (like how it would of had you selected Recovery HD from the boot menu)
23) Now your computer should go through some basic prompts, install for about 15 minutes, and then restart and finish installing for about 35 minutes.
24) You should be back to normal. DO NOT UPDATE TO that 10.4.7 or whatever it is called. if your computer asks, click show details and UNCHECK that option.