From the File menu choose 'Publish to a folder'. You should create a folder somewhere convenient specifically for this and choose it when publishing to a folder: this folder should not contain anything else.
You now need an FTP program (FTP is the 'protocol' used for uploading) to upload the contentsof the folder to your server. Cyberduck is free (donation requested): Transmit is $34 but I think better. You will need the server address (your hosting service can tell you that), and your username and password for that service. You can drag the contents of your folder to your webspace, or create a folder there and drag the contents to that if you prefer.
You should note that while your version of iWeb works OK in Lion, you may have problems with it if you upgrade to Mountain Lion. If you want to continue using iWeb in that event, you will need to purchase iLife '09 or '11 box from Amazon or another independent retailer: both contain the later version of iWeb which also will publish directly using FTP.