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This is a very basic question.I have a .dmg file of Lion on one of my partitions.How can I install Lion on my mac using that?What should be the startup

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Open the .dmg which will mount the disk image.
Follow the on-screen instructions, should be pretty straight forward, I believe it says "Install OS X" or "Install OS X Lion"

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To make it a clean install:

Burn your .dmg file on a CD or put it on a USB stick/external hard drive. There are heaps of tutorials how to do this, like here

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