Lion was not an upgrade to Mountain Lion
Lion OS X 10.7 came first. Then OS X 10.8 Mt. Lion.
Trying to install OS X 10.7 Lion over Mt. Lion is how you rendered your system inoperative.
You can't just reinstall on older OS X version over a newer OS X version.
It's more complicated than this.
If you want to run an older version of OS X, you first need to find a way to archive all of your important data.
Either to optical discs, USB Flash Drives or external hard drives.
You are going to need a copy of OS X 10.6 Snow Leopard if you do not have a retail install disc or original system restore discs that have OS X Snow Leopard on them.
Then you are going to need to completely erase and reformat your main internal hard drive and do a clean install of OS X 10.6 Snow Leopard and download and install all of its updates to get back to OS X 10.6.8
This version has the Mac App Store icon installed in the dock.
From there, you can decide if you want to install OS X10.7 LIon or OS X 10.8 Mt. Lion.
If you want to run Lion, you need to contact Apple and ask for a special code to get to the paid download on the Mac App Store.
Thanks for the quick reply MichelPM,
I feel dumb but for some reason I was thinking that Lion came after Mountain Lion, oops.
I don't want to reinstall Lion for obvious reasons, like you said it's an older version.
The real problem is that I can't boot up into osx and just get stuck on the grey screen.
So since ML is the latest osx, and I have the option to reinstall it in recovery mode, then I'll go ahead and try it and
hope it solves the problem.