A number of news outlets reported yesterday that Apple will distribute Mac OS X 10.7 Lion via the Mac app store. It's a logical conclusion, given that they've distributed the Lion developer previews through the Mac App Store. However, it makes me wonder whether they'll provide some kind of physical media as well. There are a number of scenarios where you want to be able to do a fresh reinstall of the OS, like a hard drive failure, or need to boot off another medium, perhaps to run Disk Utility on your startup drive.
Apple ships the MacBook Air with a Software Reinstall USB drive, which allows users to restore the machine to its original configuration without using an optical disc. The USB drive itself is quite small, and is a little flimsier than the kind of drive you might want to carry around with you. It probably costs Apple very little to make, and I'd say it's a good candidate to be the physical media for Lion.
The big question in my mind is whether Apple will charge an additional fee to get Lion on a USB drive. It seems that the Mac App Store will be the preferred distribution method for Lion, although I imagine it will also be available stand-alone on USB or DVD. (After all, not everyone has the bandwidth to download a 3-4GB operating system.) There are three possible scenarios for App Store buyers:
Apple provides Lion on USB for no extra charge. Upon installing and registering your copy of Lion, the OS asks for an address where you'd like the USB reinstall drive sent.
App Store buyers pay small fee for Lion on USB. At some point in the process (in the App Store itself? upon registering?), you're given a chance to buy a USB reinstall drive for a small fee, maybe $10 or $15.
No physical media option. In this scenario, App Store buyers are out of luck when it comes to getting a physical copy. In order to get a USB install drive, you have to buy a boxed copy of Lion. This doesn't seem particularly plausible to me, but it's not outside the realm of possibility. One interesting permutation is that it may be possible to put the Lion installer onto your own USB drive manually.
If I had to place a bet, I'd go with option 1, but only by a hair. I certainly wouldn't be surprised to see Apple pick option number 2.