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A live CD or live disk is a self-contained bootable and fully operational operating system (OS) on a disk, typically a CD or DVD or even a USB drive, depending on the size of the OS. This version of an OS can boot and run on a PC without ever needing to be installed on the computer's hard drive or changing the PC settings, allowing a user to recover files on a computer with a corrupted OS or to simply experiment on different things without fear of corrupting any files on the disk or the OS installation. Some versions of Linux are small and portable enough to function in a live CD.
A live CD is a version of an OS that can run entirely on a CD/DVD without the need for installation on a system hard disk and will utilize the existing RAM and external and pluggable storage devices for storing data, as well as the existing hard drive on that computer. Since no installation is required, this also means that a live CD can boot on a computer with no hard drive at all. This allows users to transform the nature of the machine they are using, say, from a Windows machine into a Linux one, radically transforming the work environment without having to modify the installed OS. All the users have to do is plug in a live CD, boot from it and they then gain access to a totally different OS with totally different functions.
A live CD is very useful for sandboxing applications and settings before putting them into production environments or for recovering data from hard drives unable to properly boot into the installed OS for any reason. And since the OS itself resides in a read-only media, the risk for viruses and malware is very low, making it an ideal setup for secure computers.
Some Linux distributions such as Puppy Linux and Damn Small Linux, which were designed for older systems and have miniscule system requirements, are perfect for doing simple administrative stuff and for performing recovery of a dead computer.