I don’t blame you for being a little hazy on this. Lion significantly changes the way we now install, troubleshoot, and repair our Macs. Allow me to give you a peek inside my Lion Toolbox.

When you install Lion on your Mac, the Lion installer creates a bootable partition called Recovery HD. You boot into this partition by holding down Command-R at startup or by holding the Option key and then choosing the Recovery HD partition that appears on screen.

When you boot from this partition you’ll find a Mac OS X Utilities window. Within this window you see these choices: Restore From Time Machine Backup, Reinstall Mac OS X, Get Help Online, and Disk Utility.

Restore From Time Machine Backup does exactly that. Connect a drive that has a backup created by Lion’s Time Machine and restore from it. Lion’s version of Time Machine, by default, backs up your entire drive, including the OS. Perform a full restore to return your Mac to the state it was in when it was last backed up.