ReadyBoost is a new disk caching technology included in Windows Vista that uses flash memory to boost your system performance. It can use any form of flash memory such as a USB 2.0 drive, SD card or CompactFlash.
ReadyBoost functions as a complement for SuperFetch, giving SuperFetch another place to cache data. SuperFetch is a technology included in Windows Vista which prioritizes the programs you are currently using over background tasks and adapts to the way you work. This technology tracks your computer usage behavior and intelligently preloads applications into memory. This helps improving the general performance of your system and the loading times of your core applications. While SuperFetch loads by default all the necessary files into the main memory, ReadyBoost complements it by loading data into alternate storage devices such as USB 2.0 flash memory sticks.
While the USB flash drives are not as fast as the main memory, they can be faster than a hard disk drive and enabling ReadyBoost can free up some of the main memory which could be used for other tasks and applications.

How to use Windows ReadyBoost
First of all you need to have a flash memory device, such as a USB 2.0 drive. If you need to buy one then please make sure it is a fast speed drive and that it is compatible with Windows Vista as some old models have compatibility problems. If you need more guidance, check this page on ExtremeTech. They tested nine USB flash memory drives and made a list with the ones that worked and the ones that didn't.
The device can have any amount of memory from 512 MB to 4GB. If it is bigger than 4 GB there is no problem, but ReadyBoost will use only up to 4 GB due to the limitations of the filesystem.
First you plug it in and the Autoplay menu pops up.
ReadyBoost

Click on Speed up my system and then select the amount of space you want to be used by ReadyBoost. The recommended amount of memory to use for ReadyBoost is one to three times the amount of memory (RAM) installed in your computer. For instance, if your computer has 512 MB of RAM and you plug in a 4 GB USB flash memory stick, you should set aside from 512 MB to 1.5 GB.
ReadyBoost
Unfortunately, there are some situations when you may not be able to use all of the memory on your storage device to speed up your computer. Some USB storage devices contain both slow and fast flash memory, and Windows can only use fast flash memory for ReadyBoost. So if your device contains both slow and fast memory, keep in mind that you can only use the fast memory portion for this purpose.
After you have selected the amount of memory for ReadyBoost, click the OK button and that's it - ReadyBoost will start its work.
If you look on the memory stick you will see a file with the name ReadyBoost.sfcache. That is where ReadyBoost does all the caching.

ReadyBoost
Does it work?
We did not have everything that is required for a proper benchmark so we searched for reviews on the Internet. According to Tom's Hardware Guide and AnandTech, the performance improvement varies. The most impressive gains are made on less powerful systems with 512 MB of RAM, while on systems with 1 GB of memory and more, the gains are negligible.
We used ReadyBoost and a 2 GB USB memory stick on two systems and we noticed the same trend. On a system with 2 GB of RAM memory, ReadyBoost did not seem to provide a visible improvement but, on an older laptop with 756 MB of RAM and a slower hard disk drive, the applications started a bit faster.

Source: http://www.vista4beginners.com/