This doesn’t require a CD or anything just an internet connection.

1. Restart the Air
2. When you hear start up Chime hit (and hold) the Option button
3. Goto Drive options… (something like that disk utility?) and under the advanced tab reformat your HD.
4. Reinstall OS (this is available through this start up utility, it goes out on the internet and downloads the right OS for you.

Its a very easy process, almost intuitive once you see the menu of stuff you can do with the options. It looks like its almost impossible to mess things up permanently too with the solid framework apple put together.