Many of you probably have one or many older USB drives which are tiny in size (less than 256 MB) which makes them almost unusable. So a good use for one of them might be to make a Windows 7 password reset disk.
If you forget your computer password, you can use a password reset disk to create a new one. We recommend that you create a password reset disk when you create your password, so you don’t lose access to your files and information.
You can get to this tool by going to the Control Panel > User Accounts and click "Create a password reset disk". The wizard walks you through the rest and there is really nothing to it (just enter your current password and then click Next several times). The resulting data file is less than 5 KB in size, so any USB drive will work.
This disk can be used to, as you can guess, reset your password in the event you forget it so be sure to keep it in a safe location.
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The concept seems no different from writing it down and carrying it in your wallet. All the same vulnerabilities but the USB drive is too big for your wallet.