U3 and PortableApps

That is U3 and not the famous U2.
Both U3 and PortableApps are methods of storing and running Applications from USB Flash Drives. U3 is a platform and a USB Flash Drive has to be a "U3 smart drive" to run U3 applications. PortableApps on the other hand will work on any USB Flash Drive. The other difference is that PortableApps features mainly Open Source (free) software, whereas U3 has some freeware but mainly commercial applications, like ThinkFree Office for U3 (I guess the "Free" of ThinkFree is Free of MS?) and WinRAR for U3.

My boss remarked that this was like the old days of DOS and floppy disks - remember when you could run a program from a floppy drive? In fact, right now flash drives of 512MB or less would be recognized as a floppy drive when it comes to booting from them.
There are a number of ways to make a USB Flash Drive bootable with everything from DOS to Windows versions to (of course) Linux. Unfortunately this will work only if your PC or Notebooks BIOS supports booting from a USB device, and this is limited to PCs from the last year or so. See Bootdisk.info for more information.