Lyon, the son of former Hawthorn player Peter, was born in Devonport and attended Melbourne High School. He was recruited from Kyabram and debuted in 1986 with the Melbourne Football Club, playing in a Grand Final in 1988. He quickly became a dominant player in the AFL, winning his first Melbourne Football Club Best and Fairest Award in 1990. He became Melbourne's captain in 1991, and eventually became the longest-serving Melbourne captain in club history until he was released from the role after the 1997 season due to the club's belief that he would suffer from too many injuries. Lyon was known for playing with many alleged back injuries and his presence on the field despite such alleged adversity saw him as an inspiration to teammates.

Lyon finished his career having won two Melbourne Best and Fairest awards, three All-Australian teams. His career ended as a result of increasing back problems. A broken leg, footage of which is often played on The AFL Footy Show ended one of his seasons. In the end he finished with 226 AFL games and 426 goals in 1999, third best all-time for a Melbourne player.Gary has three sons with wife Melissa: Benjamin, Joshua and Thomas and the boys continue to play football at their local football clubs.

Appearing on The AFL Footy Show late in his playing career as a panellist. Lyon, alongside James Brayshaw took the hosting reins of the program in 2006 after Eddie McGuire became CEO of the Nine Network. Previously he had worked alongside Brayshaw on The Sunday Footy Show and in 2005 on Any Given Sunday, as well as being a presenter of the Melbourne Commonwealth Games 2006 coverage on Nine.

His radio career began in the late 1990s on 3AW, and in 2004 he hosted Morning Glory on SEN 1116. In 2005 he returned to 3AW, and appeared on Sports Today as well as providing special comments for the station's AFL coverage. In 2007, Lyon moved to Triple M where he currently co-hosts Friday Night M Sport with James Brayshaw. He is a columnist for the newspaper The Age, and has co-authored children's books including those in the Specky Magee series with Felice Arena.