Mountain lion install failed due to hard drive failure. It said I needed to repair the disk and I was taken to the lion recovery menu.

Unfortunately, and quite idiotically, I never made a back up of my files and the lion operating system before trying to upgrade. My main concern now is just making sure none of my files were lost because of the install failure. I don't know what to do from here because I'm afraid to make a mistake and never be able to recover them again. What can I do to restore my computer back to normal? When I look under Macintosh HD in the Disk Utility option on lion recovery, it seems as if it recognizes that all of my files are still intact, because about 200 GB out of 319 GB are used up on it. This correlates to the amount of files on my disk. Pleaseeee tell me I didn't just lose all of my files. Any help will be greatlyy appreciated!
Sincerely,
Mathew Smith

You only need the powered exernal drive, OS X reinstall is free to install on the external drive.
Hold the option key and boot from the extenral drive.
When OS X upgrades or installs (without a disk wipe first), it doesn't touch Applications and User account folders (only Apple programs) so as long as the drive and file system works, (even if OS X doesn't boot on that drive) the files can be recovered via normal drag and drop methods.
If you can't access the files normally, only then you will have to install Data Rescue on the external drive (another $100) to read the 1's and 0's of the non-encrytped files directly, bypassing the file system structure. Thus is the price for not making adequate backups.
Most commonly used backup methods
In some major cities where there is a lot of computer tech support competition, you might be better with a local PC/Mac data recovery and restore service, saving you some money. But with the extenral hard drive you can then later make that a TimeMachine or clone drive, which you need anyway regardless.

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