An emergency iPod boot volume can be just the thing when your hard drive goes south.
You're working on an important project and suddenly, poof!, out of nowhere your machine just up and dies. It refuses to start back up again. Your deadline is looming, and at this point you don't much care about your computer; all you want is a few more minutes with that Omnigraffle file.
Assuming the file is still in existence and that your drive is accessible, although not bootable, you reach for your trusty iPod, plug in, and calmly reboot.
You see, sometimes, such a crash is caused by a hard-drive mechanical failure, but often enough, it's the system software that is corrupted. Your data is still safe, despite being locked up inside an otherwise nonbooting machine.
Using a generation 1, 2, 3, or 4 iPod (not the iPod mini, I'm afraid), you can create an emergency boot volume to keep on hand for just such emergencies. I use the word emergency because Apple does not recommend you use the iPod as a permanent boot volume. Doing so wears out your iPod's tiny hard drive quickly, because the iPod's hard drive is designed to be used in short spurts, not for the long haul. When you listen to music, the iPod's hard drive spins only to fill up the iPod's built-in RAM cache. It then quickly spins down and parks the hard drive's heads until they're needed again.