Live OS distribution (LiveDistros) is hugely popular with open source fans but may be new to Windows addicts. In a LiveCD, the operating system is stored in a bootable CD or a DVD which can be directly used to boot to the OS without an installation. Booting with a LiveCD does not modify your hard drive structure or change any of your current settings.
For example, assume you are running Windows XP. You want to try out Linux just to get a feel of it but the separate partition creation and time consuming installation processes don't encourage you to do it. You can easily use a Linux LiveCD such as Ubuntu Live. Just download the Ubuntu LiveCD image, burn it and boot Ubuntu Linux without complicated installation procedures or separate perditions. Once you are done experimenting, shut down the PC, remove the LiveCD and reboot. Windows XP (or whatever your previous OS was) will boot just like before!
The Live OS performance is greatly reduced due to the fact that it is run from a CD or DVD which has a slower data transfer rate. You will also not be able to save anything in live mode. This is why it's good for experimenting.
There are over 300 LiveCDs of many different OS. In addition to the Operating Systems, Live images can also be used for computer recovery purposes, games, OS replacement, clustering, diagnostics and more. Check the 'Primary Function' colum in the list for the functions available.
Just download the LiveCD image of you choice, burn it and boot it! You may need Nero or similar burner software to burn the image. Remember, burn the image using 'Image burning' option. Burning downloaded file to a Data CD wont work.