While today's Macs have a recovery disk partition on the internal hard drive that makes it easy to recover from problems, it can also be useful to have an external recovery disk. It is very easy to create one using Apple's Recovery Disk Assistant for Lion and Mountain Lion. it could come in handy if your hard drive is damaged or you need to swap it out for a new one.
Check out MacMost Now 826: Creating a Recovery Disk at YouTube for closed captioning and more options.
You can download the Recovery Disk Assistant at http://support.apple.com/kb/DL1433.
After I highlight the correct thumb drive it asks for a password. Password for what, the thumb drive (which doesn't have one) or the computer? I tried entering the computer password and it did not work. I tried leaving the password blank and it did not work.