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Many applications have not yet been updated to work properly with Lion. This would not be Apple's problem. Contact the developer and ask them. Most developers are very good about answering questions.
 
Quote from the developers website: "The Air Display host software runs well on Lion, but has this limitation: the built-in video driver on certain 2008 and 2009 Macs is incompatible with third-party video drivers. You can still install the Air Display host software, but until Apple fixes the issue, the Air Display drivers will disable themselves on Lion on these specific machines."

It does seem to be a problem on Apple's side, I'm just hoping Apple will release a fix soon, or if they ever will? :/
 
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