An update is now available that will allow Xbox 360 owners to use any generic USB stick (over 1 GB in size) as a memory card to save profile data, save games, and even disc based games. Considering the price difference between a typical flash drive and the previously proprietary Xbox Memory Unit, this update is nothing but good news.
If you plan on using a USB flash drive keep in mind the drive must be at least one and no more than sixteen gigabytes in size. The USB sticks will need to be setup through your 360 first before you can use them. You can plug two sixteen gigabyte sticks in at once for a total of thirty-two gigabytes.