As i understand your question... You will be able to play games and manipulate documents as long as said games, and document software runs on linux.
There's a few options, actually for the rest of the question
If you will be switching between systems, select a USB install with a persistant data option - most ubuntu varients will let you do this with unetbootin. You can use the rest of the drive as well, i believe.
Alternately you can often simply install the OS to the thumb drive, as you would a regular OS, with the install cd and partitioner. This is only a good idea if you are unlikely to switch systems (there can be wierdness due to fstab and driver related things), and needed to use a larger thumbdrive or USB hard drive, and wanted all the space accessible to linux
Does it do any harm if I don't. Is it preferable and why? – Kwang – 2012-04-18T13:46:12.157
It will not harm anything if you don't use a second partition. I usually do this only for organizational reasons(I don't know any specific/tecnical reason to do that unless the "isolation" from the Linux files from your personal files). – Diogo – 2012-04-18T13:52:21.120
1
gparted
andcfdisk
are the most common linux partition tools I've seen. @Kwang you don't have to do it that way, but if something goes wrong with your OS, it's nice to not have to remove/backup all your files to fix it. My /home is a different partition from the rest of my OS, and I can swap my OS and keep my home directory if I ever want to. – Rob – 2012-04-18T15:21:47.450