Can't burn Mac OS X 10.7 Lion to a disc because it doesn't have enough space
Like @Mark Wilson mentioned in the comments, "use a dual-layer DVD."
A "standard" DVD only holds 4GB of data. Generally a little less than 4GB usually as the DVD's file system has a little overhead so it is usually 3.9GB or thereabouts.
Best Buy, Office Depot and Amazon all sell dual layer DVDs. Look for ones with 8.5GB capacity that say "DL"after the DVD-R or DVD+R on the packaging.