Make Your Old USB Stick Into a Digital Multitool

 With 8GB flash drives available for under $20 and 32GB drives edging into the mainstream, nobody can blame you for shelving old USB sticks. But there are a surprising number of uses for those rickety, sub-gigabyte keychains.

There are nearly endless ways to bring a USB stick out of retirement, and they're not just gimmicks: virtually all USB sticks, 32MB USB 1.1 dinosaurs included, can be repurposed into anything from a lifesaving troubleshooting tool to an entire portable OS. Here are your best options:
Turn it into a physical "key" for your computer
For security freaks or the extraordinarily literal-minded, Vista has built-in software to convert your USB key into an actual key, such that your PC won't boot without having it inserted. It might not be ideal if your key may be old enough that it is likely to fail on you, if you have a propensity to lose tiny things, or if your laptop only has one or two USB ports to begin with, but it definitely offers a special kind of peace of mind. For Macs, Rohos essentially does the same thing, but at $30, it's not particularly recession-friendly.
Install a portable OS
This is actually simpler and less esoteric than it sounds—installing a wide array of Linux systems is pretty easy nowadays, and will more importantly net you a fully functional desktop that you can take with you wherever you go. Lifehacker recently assembled a useful comparison of popular USB-able Linux distributions, in which they recommend the fantastic UNetbootin or creating the bootable keys in the first place. It's worth noting that two of these distros will work on keys at less than 128MB capacity (DSL is just 50MB, total) and all carry a legitimately useful range of apps.
Use portable apps to create a pocketable user profile
Most free software now comes in a portable variety, meaning that at least under Windows, programs that normally extend their tentacles into your user profile and registry can be installed completely—user data included—onto a USB stick. All you do is insert the stick and find the desired .exe, and you're good to go.
The most obvious advantage to this is profile portability—in other words, your portable Firefox (or Opera or Chrome) isn't just the app, it's your favorites, history, user preferences and cookies too. The portable version of Pidgin, a multiprotocol IM program, can hold your account data, transcripts and settings. Most of these installations are quite small—Firefox is just 8MB, for example—so you can build an extensive user profile on all but the oldest keys.
The very best one-stop shop for portable apps is the, well, aptly named PortableApps.com.
Create a powerful troubleshooting toolbelt
Portable antivirus and file recovery apps are convenient, but a USB key can be loaded up with much more powerful software. Ultimate Boot CD for Windows is a sort of software panacea which, in addition to including a selection of Windows maintenance apps, carries a veritable treasure trove of low-level troubleshooting programs, made accessible by booting into a sort of temporary "Windows Lite" desktop. It can manage disk deletion and partitioning, software and hardware diagnostics and a huge variety of lifesaving recovery functions. Despite the "CD" part of its name, Ultimate Boot CD for Windows can be loaded onto a USB key, though it requires a Windows installation disc from which to build the aforementioned "Windows Lite" environment. If you don't run Windows but still want a basic DOS-based suite of hardware diagnostics and disk tools, the vanilla Ultimate Boot CD has you covered.
Convert it into a tiny SNES, Genesis, MAME, etc.
Emulators are tiny, and most ROMs are even tinier; a USB key, no matter the size or speed, can probably hold more vintage console games than you can find the time to play. Many popular emulators come in a portable flavor, so your display settings, saved games and cheats will follow you everywhere. Without the need to install anything, this potentially opens up work, school or other public PCs to most pre-PlayStation gaming. Popular portable NES, SNES, Game Boy, Genesis, and arcade emulators. As for ROMs, that's on you. (Pro tip: GOOGLE).
Carry a portal to your home computer
Virtual Network Computing (VNC) sounds more complicated than it is—it simply lets you see and control your computer screen remotely. Whatever OS you run (Windows, Mac OS X, Linux), VNC servers are simple to set up and, if configured correctly, plenty secure. While many provide web interfaces to be accessed through a browser, they're almost always clunky, Java-based monstrosities. A simple VNC client (download the binary archive version) will carry your settings, run responsively and offer more quality, speed and transfer options than its bastard HTTP brother, transporting a home computer's desktop to wherever you happen to be.
Donate it to charity
If you're some kind of ingrate who doesn't see the potential in any of the above options (or you're just a good, charitable person), InVineo, a non-profit tech outreach organization will find someone who does. They'll gladly take your 64MB Cruzers and send them to developing countries to be used in schools or local governments.