I have previously posted about using MacFuse with Snow Leopard, but if you have already upgraded to OS X Lion, you may be having trouble finding a version of FUSE to use.

Many people have commented that my Snow Leopard build works fine, but according to this thread there is a new project called OSXFUSE that picks up where MacFuse left off. The project incorporates the source code below and already supports OS X Lion natively. The project is just getting started, but a beta binary release is promised in the next few days.

I would recommend waiting for OSXFUSE.

You can find more information at the project homepage (not online yet) or find the source code on github.