When it comes to computers there are three (possibly four) ways for you to store your data and run your applications.
The first -most common and arguably the simplest- way is to simply save data and run programs is through your own system's internal memory. This doesn't really need an explanation (I am going to go out on a limb and assume that if you know how to browse the Internet you know how to save files and install programs). The main advantages to this way of managing your data is that it is simple, safe (or rather the easiest to secure) and most applications are designed with this in mind.
The second way is to store data or run programs is through the use of removeable memory. Removeable memory ranges from the SD Card you plug into your digital camera, to 250 gb portable hard drives. The main advantage to removeable media is its portability... you can access your files (and potentially your programs) wherever you happen to be. The bad points are you can lose these removeable media and for a lot of people it might seem harder to secure data stored this way. Technically, you could conceivably run any program (that would fit) from a flash drive, in fact the new San Disk flash drives have software to help you do this. For a great source of Applications you can install and run from a flash drive (so that you can use the same applications on any computer with a usb drive) go to Portable Applications: they have antivirus, word processing, media player, and lots more software you can run directly from your flash drive.
The final way to store information or run programs is by storing your data on the internet (the fourth possibility is doing the same thing on a private network). One advantage to this is that you have access wherever there is internet, and the only have to carry around your login info (and what else were you going to use your brain for?). The other big advantage is the ability to grant access to your info to any number of people (and with newer applications, it is a lot easier and cheaper to actively collaborate online on calenders, projects, documents etc). People will generally feel this is the least safe method, and but in many ways it is more secure (ie it would be much more difficult to hack or infect google's servers then it would be to do the same thing to my pc). In short, storing data and running applications off of the web has significant advantages. A good summary of this method can be found here at ITRedux.
I will tell you how I put all this together personally in an upcoming post.
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