Microsoft Provides a tool to do this for you - Windows 7 USB/DVD Download Tool which is available for download here. If you need instructions on how to use the tool, see the Microsoft Store Help on the ISO-Tool (http://store.microsoft.com/Help/ISO-Tool).

It surprised me to find that there are very few dead-simple guides to creating a bootable USB thumb/pen/flash drive for a Vista and/or Windows 7 installation. I cobbled together the following from VistaPCGuy and another source I don’t remember right now.

This will walk through the steps to create a bootable USB flash drive for the purpose of installing a Vista or Windows 7 OS. These instructions assume that you have a computer with Windows Vista installed on it.

Required:

• USB Flash Drive (4GB+)
• Microsoft OS Disk (Vista / Windows 7)
• A computer running Vista / Windows 7

Step 1: Format the Drive
The steps here are to use the command line to format the disk properly using the diskpart utility. [Be warned: this will erase everything on your drive. Be careful.]

1. Plug in your USB Flash Drive
2. Open a command prompt as administrator (Right click on Start > All Programs > Accessories > Command Prompt and select “Run as administrator”
3. Find the drive number of your USB Drive by typing the following into the Command Prompt window:
   diskpart
   list disk
   The number of your USB drive will listed. You’ll need this for the next step. I’ll assume that the USB flash drive is disk 1.
4. Format the drive by typing the next instructions into the same window. Replace the number “1” with the number of your disk below.
   select disk 1
   clean
   create partition primary
   select partition 1
   active
   format fs=NTFS
   assign
   exit
   When that is done you’ll have a formatted USB flash drive ready to be made bootable.

Step 2: Make the Drive Bootable
Next we’ll use the bootsect utility that comes on the Vista or Windows 7 disk to make the flash drive bootable. In the same command window that you were using in Step 1:

1. Insert your Windows Vista / 7 DVD into your drive.
2. Change directory to the DVD’s boot directory where bootsect lives:
   d:
   cd d:\boot
3. Use bootsect to set the USB as a bootable NTFS drive prepared for a Vista/7 image. I’m assuming that your USB flash drive has been labeled disk G:\ by the computer:
   bootsect /nt60 g:
4. You can now close the command prompt window, we’re done here.

Step 3: Copy the installation DVD to the USB drive
The easiest way is to use Windows explorer to copy all of the files on your DVD on to the formatted flash drive. After you’ve copied all of the files the disk you are ready to go.

Step 4: Set your BIOS to boot from USB
This is where you’re on your own since every computer is different. Most BIOS’s allow you to hit a key at boot and select a boot option.