Options for when a Mac cannot read an OS install disc
If you have an OS X installation disc that is not working on your Mac, there are several options you can use to get it up and running again.
Retail DVDs that are stamped as opposed to burned track-by-track in a home burner are more compatible with drives and usually can be read by most DVD burners. Despite this, sometimes there may be issues with a particular drive that prevent a disc from being read or used in special situations such as a boot drive.
If this happens with your boot DVD, there are several options available:
Replace the disc
Check the disc for any visible errors, and if they are present, then try replacing it. Sometimes people have had success in getting new discs at Apple retail stores, but if you cannot get it replaced for free, then consider purchasing a new one.
Replace the drive
Test the disc on another Mac to see if it will boot to it properly. If so, and especially if your drive is having trouble reading other media, then it may be time to replace the drive on your Mac. You might try puffing compressed air into it as a last-ditch effort to clear any dust or debris and fix the problem, but if that does not work, then a new drive would probably be better to have.
Use an external drive
Instead of tackling the optical drive or the disc, you might try cloning the boot DVD to a spare external drive and using that for your boot drive. This is an easy way to boot a Mac and install OS X, and is also a faster solution as well. Partition the disc so the cloned boot partition will be just large enough to hold the DVD's contents, and then clone the drive to it using Carbon Copy Cloner or a similar cloning utility.
Regardless of the method you choose to remedy the situation, be sure that you retain the ability to boot your Mac to an alternative volume without relying on an Apple retail store or another third party. This will greatly help when troubleshooting any problems that crop up in the future, especially if you need to fix problems with the file system.