ObDisclaimer: this is what works for me, your mileage may vary, etc.
With the price of flash drives and portable harddrives coming down all the time, I though it'd be interesting to brainstorm on the possible uses and stocking of a multi-gigabyte rewriteable storage device.
The main use, to my mind, is data retrieval from systems that don't have a DVD writer (carrying around a blank CD and a blank DVD is fairly light, but carrying around a pack of CDRs becomes more inconvenient) — the only issue with that is the time involved for copying, particularly if the machine you're going to is an older one that supports USB 1.1 speeds but not the current 2.0 standard.
There are lots of pieces of software now that can be run off a portable device, without leaving system settings or personal data behind — they just need to be copied to a directory and run. And since more people want portable apps due to having the space to take advantage of them, more software is being written with this in mind... but for popular existing free apps that aren't already geared towards portability, there are projects such as portableapps.com that package and optimise them for such use.
I already carry a very compact selection of apps with me on flash drives I've got, chosen for the bang-per-kilobyte factor as well as utility — it's amazing what can be fit into about twenty meg, for instance. But what about when space isn't a factor?
Well, it still doesn't necessarily make sense to throw everything onto a writeable device such as a memory stick. Many apps (eg, OpenOffice.org) can run quite happily off a 'live' CD, without writing any files back during use. They may be infrequently used things that you don't want to throw hundreds of megabytes of storage space at. And whilst they're being run from a thumbdrive or portable harddrive they can be infected by viruses, if you forget to use the read-only switch on the device or the device doesn't have one. Moreover, a CD/DVD may be useable in situations where USB functionality is locked down, broken or no ports can be freed.
(Don't forget that a healthily paranoid administrator who knows their stuff can still disable running of unsigned executable files, though.)
So personally I'm inclined to subdivide into three categories —
Files for USB: files that change frequently or get incremental updates, that are typically small, such as installers for antivirus software.
Files for single-session DVD: files that are huge and static, and aren't 100% essential if no ROM drive is available. ISO images for monolithic software that takes up whole CDs. (The images don't need to be burned to CD before being used, they can be mounted using a Microsoft virtual driver or just unpacked and setup files run.)
Files for non-UDF-formatted CD-RW: files that change occasionally, but are large or that you want non-writeable.
Note that multi-session DVDs represent a particular problem, since many older ROM drives won't read them and nor will Windows prior to 2000/XP. And UDF (packet-writing, where you treat the optical media like a giant floppy disc and add a few files at a time) is a worse compatibility minefield. A more reliable method than either is to stick to CD-RW, erasing one when software in the pack you've put together is updated and burning a new set of files onto it. Pretty much everything likely to be in service can read CD-RWs.
So anyway, this is my travel kit at the moment, in generic terms...
Why no mention of U3 so-called Smart Technology™? The only time I've tried to use it, the "get new software" browser blue-screened the system I was using. In brief summary, U3 comes pre-packaged on some recent flash drives, with the aim being idiot-proof portable software... unfortunately, it does this by auto-installing a driver for a fake CD-ROM drive, all to launch an obtrusive software menu. As availability of U3 kit spreads, this is likely to get flash drives in general banned from many locations that otherwise wouldn't have noticed convenient removeable media. Well done, those guys.
(And the sales pitch they persist in laying on you whilst you're actively trying to find something to uninstall the U3 partition makes me want to knock teeth out of heads.)
Give it another few years or so and 10-20Gb sticks may well be very affordable. Of course, it'd still take a long time to fill one with USB 2.0 speeds, but read speeds are typically a fair bit faster.