Talking to Lord Harkon in Castle Volkihar, you soon get the following dialog options:

Do I get a reward for finding your daughter?
What happens now?

Ask about your reward. Harkon tells you he was about to suggest that very thing. You most certainly deserve a reward. There is one gift he can give you that is equal in value to the Elder Scroll and his daughter. He offers you his blood. Take it, and you will walk as lion among sheep. Men will tremble at your approach, and you will never fear death again.

If you are already a Werewolf?
Normally, Werewolves cannot become Vampires, and Vampires cannot become Werewolves. However, in this DLC there is an exception to the rule. Lord Harkon tells you that the power of his blood will purge the werewolf blood from you and make you whole again. If you want to remain a werewolf though, Harkon will banish you from this castle. He will spare your life once, but after that, you are prey.

So basically, if you are a werewolf already (Because for example, you did the Companions quests), then you can still become a Vampire Lord. But you cannot be a Vampire and a Werewolf at the same time. Should you choose to become the Vampire Lord, you will lose your werewolf abilities. You can later go back and get your Lycanthropy powers again, when you decide that you no longer want to be a vampire. Once you go back to being werewolf however, you will no longer be a Vampire Lord.

If you are not a Werewolf, you instead ask Lord Harkon what happens if you refuse the gift. He tells you that you will be prey, like all mortals. He will spare your life once, but you will be banished from this hall.

In case you still need convincing, Harkon provides a short demonstration of his power. He transforms into Vampire Lord form.

He asks you to make your choice, which is either:

I will accept your gift and become vampire
I don't want to become a vampire, I refuse your gift.

Basically you are choosing between becoming a Vampire Hunter (Dawnguard), or becoming the hunted (Vampire).

At this point, our walkthrough will branch into two parts. One branch will deal with the consequences of becoming a Vampire Lord, while the other branch will deal with what happens when you refuse to be a vampire lord, and decide to go back to the Dawnguard to help them fight the vampires. These two are very different, and opposing, storylines. So choose what sounds more fun to you. You can always make the other choice in your second playthrough.

Make your decision.