Download only, sooo, what happens if the harddrive dies and you have to replace it? Sure, you'll probably take it to an Apple store, and they might replace the whole machine or something (especially if it's a macbook air), but if you only replace the harddrive, how do you get Lion back onto the machine? Do you have to use the restoration USB stick from the version that came with the computer, then re-download the Lion installation, that sounds like too much hassle. They should allow people to download Lion to a USB stick. That way, you can purchase Lion in the Apple store, download it to your own USB stick (no $40 mark up a month from now), and install it at home. That beats lugging-in your MacPro, 28-inch widescreen monitor, keyboard and mouse in to an Apple store just to install the new OS. I mean, really, if you are one of the few companies that uses Macs, would you want to download the new OS to each computer? There must be a friendly way of distributing the new OS. Downloading is the modern method, but that doesn't mean it's the best method for everyone.
No different than re-installing Windows 7 from the upgrade version, but that's Microsoft. I expect Apple to be smarter, why else pay them so much money (for the computer, I wouldn't mind $30 Windows upgrades)?