Linux on your USB Key

So I've had one of those usb keys for nearly a year now and what's on it? Nothing... so I decided to install Linux on it. 256MB should be more than enough and I would be able to boot it anywhere, use it for troubleshooting and impress my friends and co-workers. Upon doing a little bit of googling I found several distributions that aim to allow you to run a full-fledged Linux distribution on your usb key. Most of them are based on stripped down versions of existing distributions, most prominently Knoppix. Others are built from scratch.

This is not going to be a massive review of the different varieties available, mainly because I only managed to get one of them to work.