I want to set-up a virtual machine on a pen drive, but I don't know what VM software might be portable or if it's possible to run virtual machine software without installation. Just for starters, it would be good if it will run any Windows host, but if it runs another host, even better.
However, do not rely on something like this to be easy to do and/or work properly in all (or most, for that matter) scenarios. All virtualization software requires host kernel level drivers to be present, and that's hard to do portably if you actually want a stable system. See the forum posts for user experiences.
Also, please be aware that running VMs can be very taxing for your flash disk - VMs generate a lot of write I/O.
Note that any solution you can find will almost certainly be usable only by administrator users, which could hinder you in any corporate environment..
(e.g. I note this quote from the forum Mihai Limbasan linked to: "es geht nur mit Adminrechten." I don't speak German, but I guess that translates as: "It will run only as Administrator.")
If you are looking for a linux image that is completely portable have a look at pendrivelinux
There is a software called PortableOS Launcher. It uses Quemu for virtualization and works fine on my school netbook without administrator access. It comes with some open source and free operating systems pre-configured, which you can download straight from the application with wget. You can also configure your own by going to options(6), then os database setup(2), then add and os(1). It opens in command prompt, though. So there is a possibility that it might not be able to run if your administrator has disabled it. You can find out more and download the portable software here: http://portableapps.com/node/21307
It sounds like you're trying to do something similar to what Microsoft's new MED-V (MS Enterprise Desktop Virtualisation) does, although its not mentioned in their marketing blurb (link below), it is in the Architecture Overview PDF on the MDOP TechNet site:
Self-install package - Deliver MED-V "One-click" installation package, which includes MED-V client installation and Virtual PC software, over a self-service website, or by using removeable media (e.g., CD, DVD). Installation process is automated, silent and easy for end users.
I think it's currently only available as part of the MDOP pack, which puts it out of the reach of most individuals and small companies.