If Snow Leopard was installed as NTFS at some point (I know I have), Lion may not be able to install. I can't confirm this as my current Mac will be staying as OS X Snow Leopard.
Go into "Disk Utility" and click on the HDD. It'll be the first tabbed item. At the bottom it says "Mount Point:," "Format" etc. If the Format reads HFS+, Max OS , Mac OS Extended or anything like that you're likely okay. If it reads FAT32, NTFS or something else you may need to perform a clean install of Lion by reinstalling SL as Mac OS Extended.