This site features a step-by-step tutorial on booting and installing Windows 7 from a USB Flash drive.
There are a number of reasons you might need to install an operating system (or other program) from a USB Flash drive. One that comes to mind is netbooks. They are as cute as can be but most of them don't have an optical (CD/DVD) drive. This tutorial walks you through installing Windows 7 using a USB Flash drive and a small utility called WinToFlash. I haven't tried it, but it looks like you can install any version of Windows using WinToFlash. You'll need a USB drive with at least 3GB to install Windows 7. The author says that WinToFlash is ".....easy to use (nearly idiot-proof and does not require you to have any technical knowledge), it is also fully portable – No installation is required and you can bring it wherever you are."
If you're a command prompt kinda person there's a link to an earlier article on how to create a Windows 7 USB installer drive using the command prompt. Enjoy!
How To Boot And Install Windows 7 From USB Flash Drive
Signing off for now,