To install ESXi on a USB drive simply plug the drive into your host, put the installation media (CD) in the drive and reboot the server. The install will start and you can select the USB drive as the installation path, the installer will format and partition the drive for you.
I used a Kingston 4GB drive because I read DELL was actually shipping these with their pre-configured ESX servers, no issues with these USB drives. I was able to free up 2 640GB hard drives from my ESX hosts that were only being used to hold the small ESXi footprint.
You will have to modify your BIOS setting (Boot Order) to ensure that USB - HDD is your first boot device, I changed my Gigabyte motherboard setting to USB-HDD, CDROM, Harddrive and it works great.
Apparently you don't even need any drives in your ESX host(s) now with ESXi 5 you can install Auto Deploy on your VCenter machine and pxe boot your hosts but I like the idea of having these portable USB drives for my installation.
I'm still curious when ESXi actually commits configuration changes to the USB device because I have tried switching the USB drive from one host to another. The issue I came across was switching the USB drive, booting up a host, changing the configuration options and then shutting down. When I tried booting up again it seemed that none of the new configuration options were persisted to the USB drive.
I'll do more testing to try and resolve this but so far I'm real happy with these devices. I have noticed that after ESXi installs on the device, my Windows 7 box will not recognize the drive when I plug it in, I just wanted to format and start over but no luck. What worked for me was plugging the device into my Synology DS1010 NAS and choosing external devices and format. I noticed that there were at least three separate partitions created by ESXi.