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How can OS X be installed from an ISO file on a Mac?

I have downloaded OS X Mountain Lion ISO file (4.42GB) as my MacBook fails to boot and I want to do a fresh installation.

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Please don't pirate OS X. – user10355 Jan 15 '14 at 20:03

Restore the ISO using Disk Utility to a disk partition (internal or external) then boot from that (hold ⌥ on boot).

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