All the installation files on Mac has the .dmg format so dmg not recognized lion is really a serious issue. Just like the .exe files in Windows the Mac system used the dmg file for installing different applications and softwares. You have just bought or downloaded a new software and when you try to install on Mac OS X lion you get the error dmg not recognized lion. The possible reason can be that the dmg file is damaged or corrupted. If this is the case then you should look for its replacement copy which you can download again or change the disk. If the dmg not recognized lion issue is with multiple files the there must be the error related to the operating system itself. You may have to reinstall the Mac OS X Lion 10.7 to fix dmg not recognized lion problem. But by doing so the stored files may get deleted and to get them back you can use the backup available to you otherwise Mac data recovery software is ready to help you. It has three simple steps of recovery scan, preview and restore. You can use it effectively to restore lost data after fixing dmg not recognized lion issue.