Wow - with the new Ubuntu 8.10 release, they put a tool right in the menu to allow you to install it to a USB key and have it bootable, so you can carry around your very own Ubuntu with you. It also will allow for persistent storage of settings, files, etc using space on the USB as you wish.
Ubuntu from your flash drive - easier than ever before!
When I tried this with a Verbtim 8gb drive, I got a nasty message about a damaged boot partition.
So after a little more research, I found this :
Ubuntu Linux 8.10 from USB pen drive
What it boils down to is this :
1> use Gparted to delete the partition on the USB key
2> use "Create a USB startup disk" from the Adminstration menu under Ubuntu to make the USB key a bootable Ubuntu
Note that first you have to have booted to the 8.10 live-CD. :)