Although, due to hardware constraints, it is not practically possible to create a portable PC on a USB drive, as is the title of this blog post on Gizmodo, you can certainly create an operating system environment that can be run straight out of a USB drive. The post also says that right now only the Windows operating system environment can be created to run portable PC on a USB drive but I have used a portable environment on multiple occasions using an Ubuntu installation. Ubuntu can be installed on a USB drive and you can also use all the necessary apps without having to install them separately.
Creating a portable PC on a USB drive doesn’t mean that you can substitute it for an actual PC or a laptop. It’s just that once you have prepared a USB drive, you don’t have to depend on the operating system of the current machine at your disposal. Since everything is already portable, you won’t require a high-configuration PC or laptop to carry on your work. Once you have created a portable PC on your USB drive all you have to do is, boot the PC or laptop from your USB drive (you may have to change the boot setup).
You can install Ubuntu on a USB drive very easily. Download the most suitable ISO file of the Ubuntu operating system and save it somewhere on your hard drive. Assuming you are using Windows, you need to use a small EXE file called UNetbootin. Once you’ve run this EXE file, everything is pretty much self-explanatory and by the time you are done, you have created a portable PC on a USB drive.
A great benefit of creating such a setup on a USB drive is that when you cannot boot your main PC or when your main Windows installation (or Ubuntu installation) has become corrupted and you cannot start your computer, you can boot from your USB drive and access all the folders and drives.
As I have mentioned above, you can create a portable PC on your USB drive with Windows as well as Ubuntu. Follow the Gizmodo link to know the steps for installing a Windows portable installation on a USB drive.