Quoted from another website:
Installing Windows XP | Vista | 7 with a USB flash drive
What you need:
The Windows 7 ISO weighs a hefty 2.5GB of disk space(IDK about Vista because I can't recall of me using a Vista OS), so a flash drive with at least 4GB of space is required. Also, you need the following programs:
Your choice of Windows Operating System ISO
BootSect
USB_prep8
PeToUSB
Download Link Here;
http://www.mediafire.com/?a46ubu7b7l7b391
When you have everything ready, insert your flash drive, plug in your notebook/laptop/netbook or whatever you call it to electricity source of your choice be it Zapdos or Pikachu and get ready to create a Windows 7 bootable USB flash drive.
Installing Windows 7 with a USB flash drive - Preparation
1.) Download the packed RAR file which I gave you the link to earlier and extract its contents to your computer’s Desktop (this makes things easier for you). This contains the three programs you will need to make a bootable USB flash drive, which are BootSect, USB_prep8, and PeToUSB.
Now that the bootsect and USB_prep8 folders are on your Desktop, do the following.
(DAPAT NASA DESKTOP ANG DINOWNLOAD MO, KUNG WALA HINDI YAN GAGANA!!)
obvious screenshot is obvious by CyberSnake
2.) Open the USB_prep8 folder, find USB_prep8.cmd and run it, pressing any key to continue when prompted. This will initiate PeToUSB. PeToUSB will be used to format your flash drive, so it is suggested that you back up any valuable data that you might have on your flash drive before proceeding. Once the backup’s done or you are sure it’s OK for you to format your flash drive, see the PeToUSB options and make sure that “Enable Disk Format”, “Quick Format” and “Enable LBA (FAT16X)” are checked. See photo below.
After you click start and agree to what comes next, your USB flash drive will be formatted, and the next step would be to configure it so that it becomes bootable. Close PeToUSB and the small command prompt window that you opened earlier.
3.) Make your USB flash drive bootable using bootsect. Here’s how. Assuming that the bootsect folder you extracted earlier is already on your desktop, simply do the following. Open a command prompt window by pressing the Windows key + R (or going to Start > Run > typing “cmd” without the quotation marks and hitting Enter).
At the command prompt, type the following word for word;
Here’s a photo of what it should look like;
And if all goes well, you should be able to read the following message: “Bootcode was successfully updated on all volumes”. This means you now have a bootable USB flash drive. Congratulations!
5.) Copy the Windows 7 install files to your bootable USB flash drive. Find your Windows XP | Vista | 7 ISO file, extract its contents using WinRAR, and copy the resulting files (all of them) into your empty and newly configured to bootable USB flash drive. Once that’s done, safely remove it, and use it to boot any computer to install Windows XP | Vista | 7 on it. It’s that simple. Installing Windows XP | Vista | 7 with a USB flash drive - What now?
NOTE***
You can still use the USB flash drive as a normal USB flash drive as a "on-the-go" storage device, just make sure you don't delete the installation components for the Operating System on your flash drive.