Now that Microsoft has released Windows 7 Beta 1 (download link) to the public it’s time to get our hand dirty and install this test version. If you’ve not downloaded, just do from the link above, the Windows 7 is a 2.55GB ISO. You can use the ISO file directly to install Windows 7 beta in virtual environments or create a create a Bootable DVD.

Or , you can use the ISO file of Windows 7 beta to create a bootable USB drive too. For this scenario you need to create a bootable DVD first or mount the ISO file. After you have gained access to the files on the DVD or in the ISO file, simply type the following commands on a system with the image mounted or physical DVD copy in the drive and the USB device plugged in:

diskpart.exe

DISKPART> list disk

Select the USB device from the list and substitute the disk number below
     when necessary

DISKPART> select disk 1
DISKPART> clean
DISKPART> create partition primary
DISKPART> select partition 1
DISKPART> active
DISKPART> format fs=fat32
DISKPART> assign
DISKPART> exit

Note: Don’t close the command prompt as we need to execute one more command later.
2. From now, X:\ is your mounted image or physical DVD drive.
3. And Y:\ is your USB device 

– Next type the following command now:

X:\CD BOOT and hit enter.

– Type another command given below to update the USB drive with BOOTMGR compatible code.

BOOTSECT.EXE/NT60 Y:

– Now copy your Windows 7 DVD contents to the USB flash drive, type the following command.

xcopy X:\*.* /s/e/f Y:\

Now all you need to do is plug the USB drive into your target box' USB slot or your DVD disc in your DVD drive and boot the box. (The target system will need to be able to boot from DVD or USB devices to perform an installation) The system will boot into the new Windows 7 boot screen. After you’ve booted the box you will be presented with the Installation wizard.

More info: Follow from step 3: Install the Windows 7 Beta