Today, Apple introduced Lion Recovery as part of its OS X Lion distribution. Built into Lion, Recovery allows you to get your Mac back up and running after a catastrophic failure. By holding down Command-R during startup, Lion automatically boots from its recovery partition rather than its primary day-to-day partition.
The recovery partition allows you to run Disk Utility, to erase your primary drive, re-install a fresh copy of Lion or restore from Time Machine. It also offers a built-in Safari web browser so you can search for help information online before applying the recovery tools.
Lion Recovery can handle hard drive failures as well using a feature called Internet Recovery. Built into new Macs, including the newly released mini and MacBook Air, this new hardware feature will download and start Lion Recovery over any available broadband connection.
Mac OS X has long had the ability to boot from a remote disk image via NetBoot, and restore the operating system via NetInstall (both based on the legacy bootp protocol, long present in NextStep and BSD). It looks like the new Macs extend NetBoot to the wide, wide Internet -- but Apple's write-up is pretty lean for the moment.
Lion Recovery and Internet Recovery make physical install discs and dongles obsolete, allowing computers to restore themselves without having to hunt for extra equipment.
[Updated to clarify that NetBoot is the likely underlying tech.]