10.7.4 is Lion - Mountain Lion is what you need to use AirPlay. Mountian Lion is 10.8 or 10.8.1.
Upgrade to Mountain Lion if you want the AirPlay features.
And if your Macbook Air is new - you might be able to get Mountain Lion for free.
Click here to see if you qualify for the free Mountain Lion upgrade. Fill out the form - wait for apple to email you the redemption code then download and install Mountain Lion.