Read this first: http://en.wikipedia.org/wiki/LILO_%28boot_loader%29
Format your Linux partition first, Install Linux, then install LILO.
You must reinstall Lilo anytime you change the partitions, or the Linux partition filesystem, the Linux binary, or any of the booted systems. You must reinstall Lilo after installing a new Linux.
When Lilo is installed it looks where to find stuff on the Linux partition. When it writes the MBR it also writes the disk addresses within the Linux partition where it finds other things, specifically files it stored in the /boot directory.
It must be able to get to the Lilo boot map file stored in the Linux filesystem.
When you wiped the disk you wiped out the Lilo boot map file.
Do not erase or move Lilo boot files in /boot on the Linux partition.
If you do then you must reinstall Lilo.
If you installed Lilo to a partition and that partition is not active (not bootable) then nothing will happen as Lilo does not get executed.
It is not as completely stand-alone as GRUB which uses more hidden disk blocks.
Some Windows disk management may try to rewrite the MBR, which will wipe out the LILO MBR.
That only messes up the Lilo MBR, which can be restored.
The easiest way to fix most problems is to boot a CDROM Linux and reinstall Lilo using the /etc/lilo.conf on the Linux filesystem. This will write a new MBR, and the Lilo boot map.