This guide creates a LiveUSB out of your standard 1 GB (or larger) USB flash drive entirely from within Windows, using a nice graphical application (no command lines), UNetbootin. The generated Ubuntu (or, optionally, another Linux distribution) LiveUSB functions identically to a standard Ubuntu LiveCD, so you can use it for Ubuntu installs or system recovery as you would a LiveCD, the only caveat being that your computer will need to be fairly modern (built after roughly 2002) in order to be able to boot a USB drive.
* Windows 2000, XP, 2003, Vista, 2008, or newer (though this guide can be done from Linux as well, see site). I have personally tested this on Windows XP, Windows 2008 x64, Ubuntu 7.10 i386, and Ubuntu 8.04 amd64; the others were reported by users. Note that this will NOT work on Windows 95/98/ME.
* A USB drive, with slightly more free space than size of the ISO file you wish to use (roughly 700 MB for Ubuntu). Your USB drive will not be formatted, so your existing files should be safe, though backup important files just in case. (The USB drive should also be formatted as FAT32, though if you don't know what that is, don't worry; your USB drive is probably FAT32 unless you reformatted it yourself)
1. Download the latest version of UNetbootin for Windows
2. Download an ISO file for Ubuntu (any of its derivatives such as Kubuntu or Xubuntu will also work).
3. Run the UNetbootin executable. The dialog shown in the screenshot below should appear (Note that the screenshots show PCLinuxOS, but the same procedure works for Ubuntu and most other distros). Select the Disk Image radio button, and use the file selector on the far right to select your ISO file. Select USB Drive as the installation type, and select your USB drive under "Drive". Note that memory cards will also be displayed, since Windows detects both as "Removable Drives", so ensure that it's really your USB drive that you're selecting. If your USB drive is not displayed, you may need to unplug and reinsert it, restart UNetbootin, restart Windows, and/or reformat the USB drive (To reformat your USB drive, go to "My Computer", right-click the USB Drive -> Format; note that this will wipe out all data on it, and should be unnecessary).
4. Press OK to begin installing to your USB drive. As shown in the screenshot below, the installation occurs in 3 stages (downloading, extracting, and installing the bootloader), but since you've already pre-downloaded the ISO file, the first stage will be skipped. Since filesystem.squashfs is the largest file (over 650 MB), the progressbar will hang once it gets to this file as it is extracted and copied to the USB drive; this is only momentary, though; wait patiently, and do not close the application.
5. Finally, after UNetbootin installs the bootloader onto your USB drive, you will be prompted to reboot, as shown below. Reboot. You should now be able to boot and install Ubuntu from your liveUSB drive, though you may first need to specify the USB drive in the boot order of your BIOS, which can usually be accessed by pressing Esc, F1, F2, F12, Del, or another key combination which is usually displayed as Boot Devices or BIOS Setup as your computer starts up.
If all you wish to do is remove the Ubuntu liveUSB installation from your flash drive in order to free up space, you can simply delete the files and folders that were created by UNetbootin, which will be listed in the files "ubnfilel.txt" and "ubnpathl.txt" on the top directory of your USB drive. However, should you wish to wipe the last traces of the bootloader and liveUSB system out entirely, you can use the format tool included in Windows (note that this will wipe out all data on your USB drive); simply open Windows Explorer, navigate to My Computer, right-click the drive letter of your USB drive, and select the Format option from the drop-down menu. Accept the default options (though you may want to check the "Quick Format" option if you're impatient), and your USB drive will be wiped clean and reformatted.
UNetbootin was created by me (Geza Kovacs). This is a simplified version of the guide I previously posted on the PCLinuxOS forum, with instructions/information that shouldn't be required for Ubuntu (altering USB drive partitioning schemes) removed. This same procedure should also work for creating LiveUSB drives out of various other isolinux-based ISO files (used by most mainstream Linux distributions, such as Fedora, PCLinuxOS, etc), though it won't work for Windows CDs or the like. If you think you've found a bug file a bug report, or post the issue you're experiencing.