Many of the answers posted already cover your question largely, here our some additional points:
For pentesting I currently have two images: I have a vmware image which I keep up to date and a "golden image" which I can install on a disk to run live (this image can be flashed directly onto the disk with clonezilla). It's a clean install which is just kept up to date (especially metasploit) with my most commonly used tools which are not provided by default.
I've used live disks before, but it was too damn slow, VMware images seem to be the most flexible (you can just keep the host clean and use different images if you would like to run scanners like Nexpose aside the Backtrack image or if you like other OS like Windows to test from ass well), but sometimes you might not have a powerful enough laptop (we use laptops which hold at least an SSD and have 8 GB ram, but 4 GB and a 7200 RPM disk should suffice to do stress-less pentests ). If you can't afford something like that I'd go with a "golden image".
To make a golden image you just do a clean install for a certain type of laptop, computer or virtual machine and you keep it up to date including all your used tools. This way you can easily flash or copy it before a test and remove it afterwards. This ensures that you can do clean tests and do not start mixing up evidences or have junk floating around from previous tests. You also do not need to update every laptop every single time (it's okay if you only have one machine, but when you start having 4 machines or more it can become a real time-saver).