Just so there's no confusion here - you can't purchase Lion on a DVD.
It's either a download, or can be available on a flash drive.
(note - OP appears to have a 10.7.2 torrent, which, though not an acceptable acquisition here, would need the same process for installing.)
If you have a download, be sure to keep a copy for later use, as the standard installer app deletes itself at the end of the install.
So, you would need to run the installer app, which will copy the installer files to your hard drive, the installer app will then restart your Mac, and complete the install. The install will probably need an hour to complete.
If you DO have a USB flash drive, with the installer, or even a DVD with the install burned to the disk (possible, but not ideal as the DVD install for Lion is horribly slow), then you can insert the flash drive, or the burned DVD, and restart holding the Option key, then choose the bootable installer for booting. And - follow the choices to install OS X.