This tutorial enables you to install, boot and run Ubuntu 7.10 (Gutsy Gibbon) from USB.
Read the brilliant guide here
In addition to installing Ubuntu to a USB device and then booting Ubuntu from USB, this tutorial will enable you to automatically save your changes and settings back to the stick and further restore them on each boot using a second “casper-rw” persistent partition. The tutorial was written for those already familiar with working from Ubuntu or another Linux desktop environment. If you do not have access to or prefer not to use a Windows computer, this Ubuntu Linux on a stick tutorial is for you.