Good beginner guide to running, installing and using a USB drive for just about anything you might need on the go. Encryption, Firefox browser, word processing, arcade games and yes even an operating system can be run off your USB hard drive… if you know how! Link.
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I’m working on a project that involves USB, and it is relatively simple to actually make your own USB-storage device from components. Chip manufacturers (I selected TI) have a lot of chips out there that are solder-and-play style USB components. You take their chip, plug USB into one side, and an IDE-compatable (amongst other bus types) device into the other side (Compact-flash is IDE compatable, as are hard disks obviously) and they just work, it shows up as a USB mass-storage device (which you can boot from). Hooray. -Jesse
usbapps.com has an assortment of cool apps.