Something about the tutorial above - if you are interested in a flash-based drive, be aware that in my experience, it is quite slow. You would not want to use it for most things, but it's useful when you just need a working, bootable OS. Additionally, unlike the tutorial above, I would suggest you get a 4 GB+ Flash drive. The cost on these has dropped off significantly as of late (< $100). This enables you to use the graphical OS X installer and plunk down the base install as provided from the installer (about 2 GB).
Ideally, you should explore purchasing a proper external hard disk for this purpose (especially if you're expecting to use it a lot). A large hard drive (80 GB+) can easily be procured for around the same cost as a decent sized flash drive. This gives you room to do things such as make a dual-bootable PPC/Intel drive, as well as provides plenty of room for data storage (e.g. whole hard disk images).
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