Step 0: Backup first in case something goes wrong.
Step 1: Make partition
1. Open Disk Utility
2. Click on your hard drive (xxx.xx GB .....)
3. Click on the Partition tab
4. Click on Macintosh HD partition in the diagram (or whatever partition you want to split)
5. Click the plus sign below the diagram. It will split off a new partition.
6. Click on new partition in the diagram
7. Select desired name and size. Format should be Mac OS Extended (Journaled).
8. Click apply. After its finished you should have a shiny new partition.
9. Keep Disk Utility open for the next step.
Step 2: Make bootable Lion DVD or flash/external drive (or if you want you could actually create yet ANOTHER partition on your internal hard drive)
1. Right click Install Mac OS X Lion.app and choose Show Package Contents
2. Navigate to Contents/Shared Support
3. Drag InstallESD.dmg to Disk Utility
4. Click on InstallESD.dmg in Disk Utility sidebar
5a. To burn a DVD, insert a blank DVD and click burn
5b. To install to flash drive or hard drive, drag destination drive/partition to destination field. Click Restore. **Be aware this will ERASE your destination drive/partition!**
6. Once bootable media is created, reboot and hold down Alt/Option.
7. Select Mac OS X at the boot selection screen to boot Lion installer
8. Follow instructions and install Lion to your new partition
