It also allows you to use the USB drive in place of the installed hard drive - and remove it from the computer when it's not in use.
So in the unlikely event that your computer gets confiscated or stolen - none of your data is accessible.
I have an Intel-based iMac - the first thing I did was to remove the installed HDD and create a bootable 128 GB USB drive that I use as the main system drive.
What You Will Need
An Intel-based Macintosh
An install DVD of OS X 10.5 (Leopard), OS X 10.6 (Snow Leopard) or the downloaded installer image of OS X 10.7 or later
A 64 GB or larger USB flash drive
I’ve chosen to use a 64 GB or larger flash drive for two reasons. First, a 64 GB flash drive is large enough to accommodate the current minimum amount of space required to install OS X directly from the install DVD. Eliminating the need to pare down the OS to get it to fit on the USB flash drive significantly simplifies the installation process. Second, the cost of USB flash drives is falling. A 64 GB USB flash drive is large enough to install both a complete copy of OS X and some of your favorite applications or recovery utilities, making it a budget-friendly emergency device that can boot your Mac and possibly repair or recover its data and get it running again.
Speed
Speed is a mixed bag for USB flash drives. In general, they’re pretty speedy at reading data but they can be agonizingly slow at writing it. Our primary purpose for the USB flash drive is to serve as an emergency boot and data recovery drive, so we’re most concerned with read speed. Focus on read speeds rather than write speeds when you shop for a USB flash drive. And don’t be alarmed when it takes longer than normal to install OS X, because you will be writing lots of data.
Format Your USB Flash Drive for Use With OS X
Most USB flash drives are formatted for use with Windows. Before you can install OS X on a USB flash drive, you will need to change the drive’s formatting to the standard used by OS X (Mac OS X Extended Journaled).
Format Your USB Flash Drive
1) Insert the USB flash drive into your Mac’s USB port.
2) Launch Disk Utility, located at /Applications/Utilities/.
3) In the list of drives attached to your Mac, select the USB flash drive device. In my case, it’s called 14.9 GB SanDisk Cruzer Media. (Like lumber, hard drives and flash drives are actually slightly smaller than their specs would have you believe.)
4) Click the ‘Partition’ tab.
5) Select ‘1 Partition’ from the Volume Scheme dropdown menu.
6) Enter a descriptive name for your flash drive; I chose Boot Tools.
7) Select Mac OS X Extended (Journaled) from the Format dropdown menu.
8) Click the ‘Options’ button.
9) Select ‘GUID Partition Table’ from the list of available partition schemes.
10) Click ‘OK.’
11) Click the ‘Apply’ button.
12) A sheet will drop down, warning you that you are about to erase all data from the disk. Click ‘Partition.’
13) Disk Utility will format and partition your flash drive.
Quit Disk Utility.
Enable Ownership of Your USB Flash Drive
In order for a drive to be bootable it must support ownership, which is the ability of files and folders to have specific ownership and permissions.
1) Locate the USB flash drive on your Mac desktop, right-click its icon, and select ‘Get Info’ from the pop-up menu.
2) In the Info window that opens, expand the ‘Sharing & Permissions’ section, if it’s not already expanded.
3) Click the lock icon in the bottom right corner.
4) Enter your administrator password when asked.
5) Remove the check mark from ‘Ignore ownership on this volume.’
Close the Info panel.
Once you complete the previous step, your USB flash drive will be ready for you to install OS X.
Install OS X
We've prepared the USB flash drive by partitioning and formatting it, and then enabling ownership. The flash drive will now appear to the OS X installer as just another hard drive that is ready for an installation of OS X. Because of our preparation, the steps for installing OS X will be no different than a standard OS X installation.
Before you begin the installation, a few notes about the process. As I mentioned earlier, USB flash drives are much slower at writing data. Since the installation process is all about writing data to the USB flash drive, it’s going to take quite some time. When I performed the installation, it took about two hours. So be patient, and don’t worry about how slow some of the process seems; this is normal. You can expect to see plenty of beach balls and slow responses as you work your way through the installation process.
How to Perform a Clean Install of Snow Leopard OS X 10.6
Perform a Clean Install of OS X Lion on Your Mac
OS X Mavericks Installation Guides
