(From http://www.pendrivelinux.com/2008/06/02/usb-centos-5-live-install-via-windows/)

The following tutorial covers the process of installing CentOS 5 to a USB flash drive using a Windows host. Once CentOS is installed, it will operate just like the CentOS live cd. A persistence feature is not being utilized in this tutorial so you will NOT be able to save and restore your changes on subsequent boots. A little background info on CentOS; CentOS is an Enterprise class Linux Distribution derived from sources freely provided to the public. This version of Linux is commonly used by many popular web hosting companies as a Linux server platform due to it’s extreme stability. We can use the Fedora LiveUSB Creator to install CentOS to a flash drive.

Prerequisites for installing CentOS to a flash drive

Windows host PC (Tested using Windows XP)

• 1GB+ USB flash drive
• CentOS 5.1 ISO
• liveusb-creator-2.4.zip (https://fedorahosted.org/releases/l/i/liveusb-creator/liveusb-creator-2.4.zip)

How to install CentOS to a USB flash drive

• Download the Fedora liveusb-creator-2.4.zip and extract to your PC
• Download the CentOS-5.1-i386-LiveCD.iso (or other CentOS .iso)
• Navigate to the liveusb-creator-2.4 folder and click liveusb-creator.exe to launch the tool
• Under Use existing Live CD, browse to where you saved the CentOS-5.1-i386-LiveCD.iso and select it
• Set the Target Device to point to your USB flash drive
• Click Create Live USB to begin the creation process

A simple progress bar will indicate the progress of your USB CentOS creation. Once the process has finished, simply restart your PC and set your System BIOS or Boot Menu to boot from the USB flash drive. If you want persistence (to store changes made) slide the bar to the desired disk space to allocate.

If all goes well, you should now be booting into your own portable CentOS.