XQuartz and DISPLAY variable

I would greatly appreciate help toward the resolution of an issue that I am having with Mountain Lion (ML) on my 2007 iMac. I like starting X11 applications from a terminal, and it used to be possible until I instaled ML. I understand I have to install XQuartz, log out and back in, but have done it all several times and I continue to be unable to do it. Specifically, the DISPLAY variable does not get set (output of echo $DISPLAY is just two blank lines).

On the other hand, ifI just start XQuartz and open an xterm I have no problem, i.e., the DISPLAY variable is set normally.

Interestingly, the same procedure works fine on my recently purchased (two weeks) MacBook Air. Any idea of how I might b able to fix this (I have already gone through the exercise of uninstalling XQuartz and redoing it, I have also rebooted the machine but the problem persists).

Thanks in advance.