Howto Install Windows XP On a USB Flash Or Pen Drive

You can install Windows XP on a USB pen so that you can troubleshoot problem or take your office with you. From the article:

All it takes is a minor error in the Windows Registry or a virus infection, and your operating system can become unbootable. But with a properly configured USB flash drive on hand, you’ll always have a compatible replacement no further away than your pocket or keychain. In addition, the flash drive can also provide a secure browser and virus scanner, and lets you take your favorite DVD burning and Office software with you wherever you may go

All that’s needed is a bootable USB Flash drive with at least 256 MB of storage capacity and a Windows Setup CD. Using the program Bart PE Builder (Freeware), you can install Windows XP on the flash drive, along with other software as needed (and as available space permits)…

Boot Windows From USB Pen Drive
Boot Windows From USB Pen Drive

=> Read more at: Tom’s hardware site

You can do the same thing with Linux and USB pen drive.