Recreate the same scenario on another user account. If the Trash isn't working there as well, then log back into your admin account, run Disk Utility to see if the startup disk needs repairing.
Instructions for Disk Utility located in HD > Applications > Utilities
Launch DU then select the startup disk on the left then select the First Aid tab.
Click: Verify Disk
If the disk needs repairing, since you have v10.7 installed, in order to repair the disk, you will have to restart your Mac while holding down the Command + R keys. Help here > OS X: About OS X Recovery
If your Mac came with a prior Mac OS X installed, do not use the install discs that came with the Mac to the repair the disk.