This typically requires a third-party utility. On both Windows and Linux, there's a number of them, but my favorite (and the one most specifically suited to Linux distributions) is UNetBootin. Use it to create a bootable drive from an .ISO, or by picking a distribution from a menu in the program. The end result should boot and run as if it were the CD itself, although some distributions (openSUSE, for one) might require special tweaking to run properly.
Be mindful of all the hardware that exists on your netbook that's worth testing: the network connections (cellular, wireless, wired); the camera, microphone and audio subsystem; and so on. Some devices may require proprietary drivers to work properly, which not all distributions may carry by default.
Always keep in mind that you've got your pick of distributions. The overwhelming majority of them will cost nothing to download and try out. If one doesn't work, grab another.
You can typically try them out with no changes made to your computer. To that end, many of your favorite distributions -- Fedora, for instance -- may already work as-is.
Puppy Linux has earned a reputation for being one of the most compact, spiffiest and most all-around useful Linux distributions around, both because of and despite its quirks. It's well suited to netbooks out of the box in a lot of ways -- but it's also imperative that you make sure its batch of drivers works with your machine.
Puppy was written to run on a variety of devices, from ZIP drives to Flash cards. For that reason, the installation process requires a little more care and attention to detail than with, say, Ubuntu. Example: If you install from a flash drive, mount the flash drive (there will be an icon for it on the desktop; just click it) before starting the Puppy Universal Installer. That way you won't have to poke around trying to mount it later and possibly mess up the installation process.
Puppy does have some limitations that are probably a product of its hybrid nature. For one, it doesn't seem to support power management out of the box: hibernate and sleep aren't available. On the other hand, it boots and shuts down fast enough that this is scarcely an issue.
Another is the way hardware is detected and used: if you have hardware that requires closed-source / proprietary drivers, you may be in for a bit of a struggle with Puppy. Tip: If you boot Puppy in live mode and your network's not detected automatically, that's a sign you might want to go with another build first.
Ubuntu Netbook Remix And Xubuntu
Canonical's Ubuntuis Linux, for most people who sit down to try it out. And for most people with a netbook, it might well be the first distribution they try out anyway. It's hard to go wrong with Ubuntu on most hardware, netbooks included: the new 9.04 version intelligently detects display sizes and does its best to make sure visual elements are rendered correctly on small screens.
Ubuntu has another major plus: it supports a wealth of proprietary hardware, including (and especially) network cards. You'll be warned about whether or not proprietary drivers are in use when you're first up and running; there's a green "device card" icon in the tray at top right on the desktop when you have a proprietary driver running.
Aside from the stock version of Ubuntu, which runs fine for many users as-is, there are a few offshoots worth checking out. First and most obvious is the Ubuntu Netbook Remix, which fits in 4GB, contains no proprietary components (if you're concerned about such things), and sports a redesigned interface for quickly accessing common tasks.
If you'd rather not stray too far from a familiar desktop, there's Xubuntu, another Ubuntu derivative that sports the Xfce window manager and has been slimmed down in other ways, too. I had much less trouble getting Xubuntu and Ubuntu proper to run on my netbook of choice; you might try those first.
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