WinToUSB

WinToUSB is a free software allows you to install and run Windows operating system on a USB hard drive or USB flash drive, using an ISO image or CD/DVD drive as the source of installation.

WinToUSB's key features include:
Easy-to-use wizard interface that provides step-by-step instructions for installing Windows on a USB hard drive or USB flash drive.
Install Windows from an ISO image or CD/DVD drive.
Support for Windows NT 6.x OS family (Vista/7/8/8.1/2008/2008 R2/2012/2012 R2).
Use any edition of Windows 8/8.1 to create Windows To Go USB drive.
Support for MBR and GPT disk layouts.
Don't need install WAIK (Windows Automated Installation Kit) or WADK (Windows Assessment and Deployment Kit).

Important notes:
Windows Vista/7/2008/2008 R2 does not have built-in USB 3.0 support, so Windows Vista/7/2008 (R2) will have to be booted from a USB 2.0 port.
USB flash drives are very slow. It takes a long time to install and run Windows from a USB flash drive, highly recommend using a USB hard disk.
Windows To Go drives can be booted on different computers, so you can carry it to anywhere and use it on any computer.Windows 7 is not completely portable. You may have activation and driver problems when booting on different computers.

System requirements:
Windows XP or later (32/64-bit).
Intel® Pentium® processor.
256MB of available RAM (512MB or more recommended).
10MB of free space on your hard drive.
800x600 graphic device (higher resolution recommended).