Bootable USB Test is a free tool which tries to boot a virtual machine from a USB key or ISO image, giving you a quick way to see whether it works. It's available as a part of the WinToFlash package, but also available separately.
Launch the program and you're able to choose either the drive or the ISO image you'd like to boot. We pointed Bootable USB Test at a copy of the AVG Rescue Disc ISO, clicked Start, and within a couple of seconds a window opened with the initial boot menu.
Choosing a USB key is just as easy. There's no need to close your PC down, reboot, maybe change your BIOS settings, reboot into the USB key, reboot again to get back into Windows. Everything happens within a few seconds and in the current session.
This is implemented in a very simple and unobtrusive way. Bootable USB Test uses QEMU to create a basic VM, creates a temporary virtual hard drive for the session and deletes it when you're done. The program doesn't need VirtualBox to be installed, and it doesn't even need installation itself, you can just unzip and run it when required.
This simplicity brings some limitations. The test VM is just about as basic as it gets, so you're probably not going to be able to test your image or drive beyond its boot menu. If you want a real emulator, run VirtualBox instead.