This design is in fact a midsize building, 9×7×7 or so, with the generator proper on the roof. You mine from within, facing a current held back by slabs. As with any building, unless you're in Peaceful difficulty or Creative mode, you'll want to secure it against monsters, perhaps by fencing or glassing in the sides. (This will also help in case of a major lava spill.) Note that once you've got it built, the pillars become optional, though you will want roof access.
Both dirt and cobblestone represent temporary blocks you'll need for assembly, and the smooth stone is (bottom) slabs. (Not all the water will be there until you remove the dirt.) It's best to start by making the pillars and roof, then run a ladder up one of the pillars and work above and below the roof. (The ladder shown is outside, but it doesn't have to be if you put a bit of wall to support it.) Place the water behind the blocks and cover it with the slabs. When everything else is ready, place the lava, then once it has flowed down to the ladders, unblock the water. Last of all, go downstairs and mine the other three temporary blocks. They should be replaced by a gush of water, then new cobblestone. The obsidian is again optional, but helpful: accidentally mining the blocks behind the lava will produce a major mess.
This design is based on this video[dead link], but with the front room slightly abbreviated. The video was uploaded on Mar 8, 2011. Level 2 is just the pillars, with a ladder and the top of the door.