These two prerequistes must be for filled
1. BIOS is set to boot from a USB, this is typical on most modern mainboards. Most people get this step ok...
2. Your USB must be formatted to be bootable which is not default by most USB manufactures.
The webpage below gives instructions on how to make a bootable USB with command prompt, setting the parition as an active bootable partition
http://www.maximumpc.com/article/howtos/how_to_install_windows_7_beta_a_usb_key