How to do a clean install

To do a clean install, there should be an option in the menu when the installer comes up.

Make sure you provide the new user with the original install discs, everything original to it when you purchased it.
You're really on top of things if you still have the box!

Before you sell or give away your computer, in addition to the steps mentioned in this support article, take these steps:

• Run Apple Diagnostics or the Apple Hardware Test. The buyer will do this (or he should), and you don't want to be surprised by the results.
• Reset the PRAM and the SMC, which might contain personal information.
• If you set a firmware password, remove it by running Firmware Password Utility in Recovery mode.
• If you activated FileVault in OS X 10.7 or later, turn it off.
• If you use Boot Camp, the partition must be deleted.
• If you created any other data partitions on the internal drive, remove them in Disk Utility.
• Erase the data partition(s) with the option to zero out data. An SSD doesn't need to be zeroed.

You can't legally or practically transfer any software downloaded from the Mac App Store to the new owner of the machine, even if it was free. That includes OS X, so if you upgraded to OS X 10.7 or later, you must reinstall an older OS, either from the installation media, if applicable, or by booting into Internet Recovery (option-command-R at the startup chime.) If you installed from physical media, deliver those to the new owner.

If you're selling the machine, or donating it in working order, and it originally shipped with OS X 10.4 or 10.5, then you have the option of installing either from the discs that came with it or from a retail Snow Leopard disc (which you must then transfer with the machine.) The buyer should understand that if he doesn't get the original discs from you, he won't get the bundled iLife applications or the Apple Hardware Test. Replacements for the original discs can be ordered from Apple.

The new owner will have to redownload any software that came from the App Store, including OS X upgrades, under his or her Apple ID. If you ever updated the bundled iLife applications (Garage Band, iMovie, and iPhoto) through the App Store, you can't transfer those either.

Remove the machine from your list of registered products. If it's still covered by an AppleCare Protection Plan, transfer the coverage to the new owner by following the instructions in the AppleCare Terms and Conditions (under the heading "Transfer of Plan.")