An OS on portable media: The future of hacking?

It's now possible to install a small OS onto a portable media like USB drive. I know it's possible to install Linux on a USB flash, 64MB is enuff. You couple this with the fact that new laptops and motherboards these days support USB boot, and the mind boggles at the possibilities.

Nowadays you have mb and laptops that not only do USB boot they also have an F12 or something to access boot menu. If I have a Linux-on-USB, even if your system is protected by a password (eg XP/W2K/etc), I just boot my Linux and mount your C drive. After that the world is my oyster, eg bank cookies, confidential files like your tax E-File, etc.

And that's USB flash. How about Memory Stick? PSP's UMD? CF? SD?

A possible protection is BIOS password, but nowadays who does that? Anyway this is only a possibility. As I said, it's technically possible now. The possible use in the real world here is not up to me to answer.