According to Microsoft it is considering to ship Windows 7 on USB flash drives to allow netbook owners to more easily upgrade their machines:

The move, which is still under consideration, is one of several things Microsoft has looked at to try to make it convenient to upgrade machines that don't come with a CD or DVD drives.

Microsoft executives have said that they recognize that upgrading Netbooks poses a challenge and are exploring ways that the company can make it easier. In an interview on Thursday, Senior Vice President Bill Veghte said that Microsoft had nothing to announce on that front.

Although a USB flash drive could offer the simplest way to move a Netbook to Windows 7, there are other options. Buyers with an external drive could hook up that to their Netbook, while another option would be an upgrade through a service such as Best Buy's Geek Squad. Microsoft also sells a downloadable version of Windows today, so, in theory it could do the same with Windows 7, allowing buyers to put the OS on their own thumb drive.

Matt Bonin, a merchant director at Best Buy, said this week that the company is aiming to work with Geek Squad to develop services to streamline Windows 7 upgrades. As for Netbooks, he said the company recognizes the challenge they present and said the store already offers services to load other types of software, such as antivirus programs.