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In more recent Ubuntu versions, you can instead use the usb-creator tool to create a bootable USB flash drive from a Live CD, and its user interface has an option to add persistent storage on the same USB drive; see Installation/From USBStick.
However, Live Cd sessions become even more useful when a persistent image can retain data and settings (even installed programs and packages) when the machine gets switched off.
By using reconstructor a CD can be remastered and an additional menu item (Persistent Mode) added on boot. No changes were made to the CD except for adding the persistent menu item. If there is a place where a persistent ISO can be uploaded I'd be glad to share The new Ubuntu Live CD persistence is an excellent capability and in addition to current Live CD uses, this will certainly make Live CDs very much more viable, useful and important.
Now you can carry around your own custom Ubuntu environment on a CD and USB Stick that all just fits in your pocket.
To change the size, modify the count parameter of the "dd" command. Make sure your USB Stick is plugged into your computer and take the Live CD that you downloaded and burned earlier and put it in your CD drive (if it is not already there).
The contents of your USB Stick is what makes your custom environment your own.
In order to partition and format your USB Stick, we first need to determine which device your computer recognizes it as and what its mount point is.