Virtual volume - newbie

I'm a newbie in Linux and i am downloading the Knoppix ISO file.
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When i was reading this review:
http://www.pcbuyersguide.com/softwar...noppix_32.html

I found this text:

However, version 3.2 improves upon this by providing the option to save your home directory and user configuration data to any drive available. This can be an image on a hard drive partition, a volume, a memory stick, zip drive, etc. For our tests, we created a 30MB "virtual volume" image (formatted as a Linux standard ext2 volume) without erasing the data on our Windows C: drive. 8)

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I would like to make a 30-50 mb virtual volume image to save my data and setting. Is this done in Knoppix or do i have to do this in Windows?

Could someone give me a short step by step tutorial how to do this?
:)

What you are looking for is the persistent home off the knoppix menu in KDE. The how to is a little out of date.

You just follow the instructions in the program that creates the persistent home it is pretty simple to do (you can not save to ntfs drive). When you boot from the CD after saving you use the cheat code knoppix home=/dev/hd?? where ??=hd and partition number to use your saved configuration there are other codes you might want to use also.