As you can't install OS X Lion, you have to install Mac OS X from the Mac OS X DVD that came with your Mac or the Snow Leopard DVD, if you keep this disc.
1. Insert the DVD and press C key while your Mac is starting to start from the disc.
2. Follow the steps to reinstall Mac OS X. When it finishes, open > Software Update and install the most recent Mac OS X version.
3. If you installed Snow Leopard, after updating, you can see App Store, so open it, log in your Apple ID, go to Account (under Quick Links) > Show hidden purchases, and show Lion, if you purchased it.
4. Go to Purchases tab, download OS X Lion and follow the steps to install it.
If you didn't purchase Lion (I assume that you pirated it in this last case), continue using Snow Leopard
You aren't starting from the DVD. After inserting the DVD, press Option key while your Mac is starting and you should see two volumes: one for Recovery HD and the other one for the Mac OS X DVD. Select the Mac OS X disc and follow the steps of my first comment