As an interesting aside, this wonder appears to have been built up in the largely unverifiable Barddas of Iolo Morganwg (Info) into a Welsh "Great Flood" myth which has taken on a life of its own. Morganwg gives the following in his Triads:

The three burstings of the Lake of Llion: the first, when the world and all living beings were drowned, except Dwyvan and Dwyvach, their children, and grand-children, from whom the world was again peopled--and it was from that bursting that seas were formed; the second was, when the sea went amidst the lands, without either wind or tide; the third was, when the earth burst asunder by means of the powerful agitation, so that the water spouted forth even to the vault of the sky, and all of the nation of the Cymry were drowned, except seventy persons, and the Isle of Britain was parted from Ireland, and from the land of Gaul and Armorica.

With the footnote:

"Llion" means an aggregate of floods. The bursting of the Lake of Llion is thus chronicled in the Triads:--"The three awful events of the Isle of Britain: first, the bursting of the Lake of Llion, and the overwhelming of the face of all lands; so that all mankind were drowned, excepting Dwyvan and Dwyvach, who escaped in a naked vessel, and of them the island of Britain was re-peopled." (13, Third Series.) In another Triad (97) it is stated that "the ship of Nevydd Nav Neivion carried a male and female of all living beings, when the Lake of Llion burst."
 
It is alluded to by Iorwerth Vynglwyd;--
 
Lle ’r gwin mal lloer ar gynnydd,
Llawn byth fal llyn llion bydd.
 
The store for wine, like the moon on the increase,
Ever full, like the Lake of Llion, will it be.
 
In the British Chronicles Arthur is introduced, as saying thus;--"There is a lake near the Severn, called the Lake of Llion, which swallows all the water that flows into it at the tide of flood, without any visible increase; but at the tide of ebb, it swells up like a mountain, and pours its waters over its banks, so that whoever stands near it at this time, must run the risk of being overwhelmed."--Myv. Arch. v. ii. p. 311

Iolo also gives as one of the "Three Arduous Achievements of the Island of Britain"*...

"the Ship of Nefydd Lord of the Patriarchs/Lords that carried in it Male and Female of every living Creature, when the irruption/bursting of the Lake of Llion happened...

None of this seems tracable to before the late 1700s, with the exception of the suggested Chronicle excerpt which contains the name (though traces may be found in a triad, given below). Even with the "Chronicle" reference, while it is possible one of the "British Chronicles" (Bruts: largely adapted from Geoffrey of Monmouth: See Other Works) does have the lake name as Llion, it isn't especially obvious that this is the case - references in the Bruts include: Brut Y Brenhinedd : Llynn Llywan (Llanstephan 1)* and Llynn Lliwan/Llynn Lliwau (Basingwerk/Cotton Cleopatra)*. The quoted Y Myvyrian Archaiology is a work which contains a number of forgeries and which Iolo had a hand in constructing (See Other Works). The reference seems incorrect; from elsewhere within Y Myvyrian Archaiology we have Brut G.Ab Arthur : Llyn Llivan, and Brut Tysilio : Llyn Llia6n ["Llyn Lliawn"], but no apparent Llion.

In manuscripts, Iolo variously translated Llion as "Inundations", "Floods" and "Torrents"*, though this appears to be the only example of this word*. While the Welsh for floods is Llifogydd, some credence might be given to the general idea that "Flood" lies behind the lake's name in that the singular term is Lli or Llif (pronounced "Lthiv"?).

However, here the name Llion here appears to be an interesting attempt to tie the bursting of the wonder-lake to the Romance notion of the land of Lyonesse, the mythological land flooded off Cornwall (See, for example, Camden*: Cornwall) which is traditionally the home of Tristan (Info), though works equally well in suggesting the lake is near Caer Llion, on the Usk.

Caer Llion, the Roman Isca Silurum (Info), however, is listed in the cities list of the British versions of the Historia as Cair Legeion/Ligion/Legion on the Usk, and only becomes Lonin/Leonin/Leonan in the Irish versions*, suggesting the current form of the name was not that used in the Dark Ages. Cair Legion matches Gildas, and the probably derivative Bede (See Other Works), who have Legionum urbis. It is therefore far from clear that the move from Liuan to Llion is justified from this point of view, though it does raise interesting possibilities.

Bromwich suggests that the Loenois or Loonois found in the early Tristan legends is actually Lothian, in Scotland, matching a number of Pictish features in the Tristan story* (for more, see Jones' Summary). Exactly when the flooding of land off Cornwall was linked to the home of Tristan is not clear (Hunt* summarises the main sources for the legend: online), though the "Drystan" poem of the Black Book of Carmarthen (Other Works) might imply an early link (English Translation). Interestingly the name Cyhelig in the poem may point at an alternative innundation story, that of Helig's land, usually regarded as being somewhere between the eastern tip of Anglesea (Ynys Seiriol) and Conway (though see earliest example in the triad below). This is summarized by, for example, Rhys* (online), and was apparently known since the 13th C, when it was captured in Latin in the Exeter Chronica de Wallia*. Bromwich (*p.lxxv) gives the triad in translation as:

These are the kingdoms which the sea destroyed: The kingdom of Teithi Hen, son of Gwynnan. king of Kaerrihog. That kingdom was called at the time 'Ynys Teithi Hen'; it was between St David's and Ireland. No one escaped from it, neither men nor animals, except Teithi Hen alone with his horse; afterwards for all the days of his life he was weak from fear.
The second kingdom was that of Helig son of Glannog, it was between Ceredigion and Bardsey, and as far as St David's. That land was very good, fertile and level, and it was called Maes Maichgen; it lay from the mouth (of the Ystwyth?) to Llŷn, and upwards to Aberdovey.
The sea destroyed a third kingdom: the kingdom of Rhedfoe son of Rheged.

Something like this has obviously played a part in generating Iolo's "Three Burstings", though Gwynnan has been conflated with the Welsh for water, dŵr to give the Noah-esque Dwyvan (note that Bromwich*. alternatively suggests Dwy "Goddess", giving "little" and "Great Goddess", while Iolo himself translates these as "Man of God" and "Woman of God", or "Daughter of God"*). An additional hint at this particular innundation can be found in the Black Book of Carmarthen poem on Seithenhin (English Translation), in which the land of Gwydneu [Gwythno] is apparently innundated. Tradition holds this to be the "Bottom Cantref" of Cardigan Bay - matching the Triad above. Bromwich* also notes a reference in the genealogy of the saints known as the Bonedd y Saint to five saints who were "sons of king Seithennin of maes Gwydno who's land the sea conquered". The Cardigan Bay land is also referred to in the Mabinogion tale "Branwen"*. You can read an English translation here, though a better translation is*:

Bran and the host we spoke of set sail for Ireland [from Caernarvon], and since the sea was not deep he waded through. At that time there were only two rivers, Lli and Archan, but thereafter the sea widened and overflowed the kingdoms.

This tradition of this being Gwydneu's land may also be backed up by a number of placenames*, though the ultimate origin of Gwydneu appears to be in Northern Britain according to the genealogies* (See Other Works) A fuller exposition on the Gwythno flood, and its possible relationship to the Helig flood can be found in Bromwich* under "G6ythno".