Little Snitch, by Objective Development, the competitor of Hands Off! already has a beta build that works with Lion. I emailed Etienne Clement, who is probably the developer (he/she answers the support emails) and couldn't tell me when a working version will be available. The reply I got was

"Hi,

We don't have a Lion version ready yet. We will keep you posted.".

Will it EVER be ready for Lion when it launches? It doesn't even work with 10.6.8 yet, although version 1.2.4 was supposed to work, but on my machine it throws constant kernel panics (I verified that it's Hands Off! doing this).

I moved from Little Snitch due to the lack of various features offered by Hands Off! but at least Little Snitch WORKS. What a shame.

I wrote the comment on 23 of June 2011 at 14:10, and I can now use Hands Off! with both 10.6.8 (Snow Leopard) as well as with the current build of 10.7 (Lion). I have updated the app status as it is now working normally with both OSs.

Version 1.3.2 works on Lion.

However there is an issue when the file writing preset is set to ask.
Applications are detected trying to write to wrong paths (there is a slash missing).
E.g. Calculator.app was detected trying to write to:
~/Library/Preferencescom.apple.calculator.plist.b6vBVnJ
instead of:
~/Library/Preferences/com.apple.calculator.plist.b6vBVnJ

Latest version (1.4.2) work fine. Moreover the issue I had with files has been fixed.