Custom bootable USB flash drives

One of the great aspects of modern USB flash drives is their flexibility. In the past, you needed an optical disc in order to either install and/or run a live operating system. Now that is no longer the case with tools such as Universal Boot Loader and Unetbootin. These tools automatically write the contents of a downloaded ISO to the USB flash drive and also allow write an MBR to them which will allow them to become bootable on modern machines.

http://www.pendrivelinux.com/install-knoppix-6-to-a-usb-flash-drive-in-windows/
http://unetbootin.sourceforge.net/
The following allows multiple operating systems to be booted from the same USB flash drive.
http://www.pendrivelinux.com/yumi-multiboot-usb-creator/
As you can see manual setup of a USB disk can be rather tedious. Hence, it is advisable to use the above when required and only use the resort to manual configuration when there is a very specific need to do so.
http://www.linuxjournal.com/content/dual-boot-opensuse-usb-stick-installer
The following demonstrates that you can boot both Windows (BartPE Recovery Environment) as well as a Linux from the same USB flash drive provided you have used the correct software.
http://www.irongeek.com/i.php?page=security/dual-boot-slax-linux-bartpe-windows-usb