I recently purchased a 16GB USB 3.0 flash drive, and I'm considering using it as a mobile operating system. It would be nice to carry with me, but I'm worried about any performance impacts from running off a flash drive, and using it as the hard drive. What downsides can I expect to encounter, both at USB 3.0 speeds and USB 2.0 speeds (as not all computers have USB 3.0 yet)?
The problem is that flash-drives are quite limited in speed as compared to spinning hard-drives and SSDs. This is because by their nature, they are not meant for high-performance usage and so use simpler, more basic mechanisms than a comparable SSD or hard-drive (which is also why they are much cheaper).
You can (currently) expect typical read speeds <=20MBps and write speeds <=10MBps. This is usually going to be slow enough that unless you are just using it as a live-OS type of system for data-recovery and such (i.e., occasional, emergency usage), then it will be too frustrating for regular, every day usage.
What is worse, is that by running an OS from a flash-drive, the non-stop writes for logs and temporary files will really eat into the flash-drive’s lifespan. Don’t forget that flash-cells have a limited number of writes before they can no longer be written, and these constant writes will use them up too fast, even with wear-leveling because again, the writes and leveling used in inexpensive flash-drives is not as efficient as with SSDs (which use things like TRIM whereas flash-drives tend not to).
You could run an everyday OS from a flash-drive, but ones that are going to be fast enough will usually also be expensive enough that you may as well just get a cheap SSD and benefit from the enhanced wear-leveling as well.
With regard to the speed variances in drives, this article has some interesting information. Symantec USB testing
There are no downsides to it apart from performance. And that too depends on the USB Drive you get. A 20 dollar 16GB vs a OCZ 40$ 16GB USB Drive show visible difference when running an OS. Also, it completely depends on the OS too. IF your running Linux, no sweat. If it's Windows, then consider getting a faster USB Drive. USB 3.0 certainly is a lot faster but you want to be able to use your OS everywhere and hence should stick with USB 2.0