Q: It has taken more than 2 hours to download Mountain LION on my existing Lion software. I don't know what to do, whether it is downloading or it's hanging there???

Depends entirely on the speed of your connection.  The download is a 4.05Gb file, so on a slow connection it could take several or more hours.

The downloaded installer will be in Applications - do a get info on it and see how big it is now.  You can check the download in a couple of ways.  One way to see the activity is open Activity monitor and look at the network panel - if the incoming network traffic is going gangbusters, your download is still active.

In your utilities folder - AM is a very handy app for monitoring what is going on with your system - cpu, disk, memory, network I/O.

Actually, if you have an 802.11n wifi router, your wifi will be nice and fast.  However, that has nothing to do with your internet connection to the world - that is determined by your ISP and whatever the limits of your subscribed service are - that will be your bottleneck, not the wifi connection to your machine.  It can also be affected by the loads on Apple's servers too, depending on where you are and which server you are pulling data from and what the loads on that Apple server center are.

If you are doing little else or nothing on that machine, just leave AM open and as long as you have incoming network traffic, that is your download.  If the incoming network graph flatlines for a long time, near the bottom, then it is either done, or has gotten hung up.

Once the download is complete, the installer is going to launch automatically too, so you will get the Mountain Lion dialogue asking it you want to continue to install.