nixCraft have writtten a small tutorial on how to use the feature that allows saving both data and desktop settings.
Read the blog entry here
How do I test persistent mode?
* Attach USB pen/hard disk to system.
* Boot from Ubuntu Linux Live CD
* At boot menu you need to type persistent word and press enter key to continue.
Now Ubuntu will automatically scan your USB hard disk or pen drive. It will also save data, your desktop settings (such as wallpaper or other stuff ) or applications on this device.