Yup, those are the steps. Once you've downloaded the installer application, don't run it.
Open Finder and navigate to Applications. Locate Install OS X Mountain Lion.app, right click on the installer application and choose Show Package Contents. Click on the Contents folder and then on SharedSupport. Double click on InstallESD.dmg.
Open Disk Utility. Insert an external USB flash drive and click on Mac OS X Install ESD in the left pane, then click on the Restore tab in the right pane. Make sure that Mac OS X Install ESD is set as the source - it should not be InstallESD.dmg. Drag the USB flash drives partition into the Destination box and click Restore. Do not drag in the flash device itself - make sure youre dragging in the partition.
Restart your Mac. Hold down ⌥ during the reboot and the boot menu will appear. Click on the up arrow beneath the USB drive icon with Mac OS X. Go into Disk Utility and delete your startup partition. Then quit disk utility and install OS X Lion.