From the Wikipedia http://en.wikipedia.org/wiki/Live_CD
LiveDistro is a generic term for an operating system distribution that is executed upon boot, without installation on a hard drive.
The term "live" derives from the fact that it does not reside on a hard drive. Rather, it is "brought to life" upon boot without having to being physically installed onto a hard drive.
It is often said LiveDistros are a good way to demo or preview an operating system without having to install it to a hard drive.
Suppose your Windows crashed. And there is lot of information left in you c: drive, so you want to retrieve them before you re-install Windows. How to do it? All you can do earlier is to remove your harddisk, and connect to your friend's machine, then copy the data.
But after Live CDs, there is a easy way to do it. Boot your system with any OS with Live CD, copy the files you want to the network drive (if available), or write into a CD or copy them to a different drive other than C: drive.
There are live cds which have pre-installed script/application can retrive your simple windows passwords, would be helpful incase you have forgetten your password after a lengthy install and patch update process ;-) (http://ophcrack.sourceforge.net/)
Most of the Linux operating system vendors ships live cd. Or otherwise you could easily download them from internet, and burn it to cds.
Click here for list of live cds. Or http://www.frozentech.com/content/livecd.php
Microsoft wont give their OS as live cds, but still there are program which can create live cds of your current system. No third party vendor is supposed to give live cds for windows because it carries windows sytem files, which are protected by law for re-distribution. But still they can deliver software which can bundle a live cd from picking system files from your own system, which live cd you supposed to use only for personal purposes. So these program bundle a live cd out of your system and gives you a iso file, which you can burn into bootable CD, and use it. To create windows based live cd's or rescue cd's see the below links.
http://en.wikipedia.org/wiki/BartPE
http://www.911cd.net/
Also with advent of Virutualization technology, you can virtually have many systems and boot any other operating system into it, still running your windows in background. With this you wont really have to spend money in writing live CD to test a latest distribution of OS. Just download the iso file of the new OS distribution. Boot them into your virtual machine, and test play with it, to check out the features, before you actually want it. See the below link on instructions to do it.
http://www.vmwarez.com/2006/02/livecd-player-virtual-machine.html
As live cd are proved to be a good way to deliver OS for initial beta purpose or demo purpose. Now the same idea is extended, i.e. Software Vendors are delivering particular OS along with pre-installed application software. So to demo their software, you don't have to install trial version even. Just boot their live cd, check out the application. Also you can be sure, It wont corrupt your current OS. With Virtual Appliance You can use them in parallel along with your current OS environment (as like totally isolated sandbox). I now remember the reason for my last Windows OS re-install. As I tried IE7 Beta, It let some of the MSXML dependent softwares corrupted. Later I have to re-install OS and as well my software to fix it.
Ruby On Rails (RoR) recently published a Live CD. Just Boot it, you will have all the environment you may need to do a web development in Ruby. From Rails to mySQL, lightHTTP, RAD Rails and much more.
http://www.railslivecd.org
Link to download alternate VMWare Appliance, to boot only rails live cd directly into virtual system.
http://www.railslivecd.org/articles/2006/06/22/vmware-player-virtual-appliance
With mini storage devices such as USB, iPod, You can store your entire system in your portable drive and use it anywhere with same settings. DamnSmallLinux Fits with less than 50MB with word processor, Browser, Mailing tool, Network Connectivity, and mostly all you need.
As livecd doesn't use hard disk space, its seriously limited to RAM as storage device for both OS files and user files. So to expect a decent experience you need a good enough hardware. These small distros proves powerful in that case. But if you use your portable device as livecd storage, then you have all the space for your files always with you.
We can expect more LiveCDs for products demo in future...
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