Ensure the recovery.img is stored in C:\Android, then connect your phone to your PC and reboot into fastboot, camera button and hold the power button until the LG screen has gone, then you will have a black screen (Just like when you first installed CM7.
Then open cmd with administrator priveliges (start search "cmd", right click it, and "run as administrator" then type "cd c:\Android" and "fastboot.exe flash recovery recovery.img" wait for it to finish then type "fastboot.exe reboot" and you will have recovery installed.
It can do various things like wiping battery stats, nandroid backup of your entire OS allows you to upgrade the version of CM7 without loosing data and installation of apps through a zip file, which can be useful if you want to upgrade the market before google rolls a new version out.
PS, been running the new version for 24hrs now and it seems to be alot smoother, not noticed any new features though, correct me if im wrong.