Yes, that's correct. Of course the SSD needs to be in an enclosure or use some other means to connect it to the computer's USB port.
The Recovery HD will present you with a menu of selections. To prep the new SSD and install Lion/Mountain Lion:
Drive Preparation and Installation for Lion/Mountain Lion
1. Restart the computer and after the chime press and hold down the COMMAND and R keys until the menu screen appears. Alternatively, restart the computer and after the chime press and hold down the OPTION key until the boot manager screen appears. Select the Recovery HD and click on the downward pointing arrow button. Select Disk Utility from the main menu and click on the Continue button.
2. After DU loads select your hard drive (this is the entry with the mfgr.'s ID and size) from the left side list. Click on the Partition tab in the DU main window.
3. Under the Volume Scheme heading set the number of partitions from the drop down menu to one. Click on the Options button, set the partition scheme to GUID then click on the OK button. Set the format type to Mac OS Extended (Journaled.) Click on the Partition button and wait until the process has completed.
4. After formatting is done quit DU and return to the main menu. Select Reinstall Lion and click on the Continue button. When prompted to select the disk on which to install click on the link to Select Other Disk, locate the SSD and select it as the target for the installation.
There are several kits for connecting drives without using an enclosure. I've not used them, so I can't really comment. But they should work. What you do much depends on your plans for the 500 GB drive you are replacing. The SSD has half the capacity of the HDD, so if needed added storage space you may want to put the 500 GB drive into an external enclosure or use something like OWC's DataDoubler kit to replace the optical drive with the HDD.
