A quick excerpt:
Fedora 9 Linux distribution makes putting a full-fledged desktop on a portable USB thumb drive a three-click affair. Even better, you don’t need Linux installed to create it, you can leave the data on your thumb drive untouched, and any files you create or settings you tweak remain in place the next time you boot up. After the jump, let’s create a fully-functional desktop-to-go using a simple Windows program and a 1GB or larger thumb drive.
Head over to Lifehacker for the complete article.