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When you purchase a new MacBook Air they give you a mini-USB drive that is used to reinstall OS X and iLife '11.

How can I format this USB stick and put whatever I want on it?

The option to format is not available in Disc Utility and the USB stick mounts as a CD.

Note: I realize what the disk is used for and what Apple says on their FAQ. My question isn't "What do you think about formatting the USB?" it is "How can I format the USB?" The answer may be that it is impossible.

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what about the option to erase? is that there? I also remember reading about a command for putting a disk back into it's "factory" state, meaning you'd have to "initialize" the disk again. I can't remember what it was called, but maybe "de-initialize disk mac os x" might be some keywords to start with. – Robert S Ciaccio Oct 26 '10 at 0:56
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@calavera - if it's read-only (see my answer below), there is no option to erase. – Dori Oct 26 '10 at 4:24

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From Apple's MacBook Air: Frequently Asked Questions about Software Reinstall Drive:

Note: The MacBook Air Software Reinstall Drive is read only. You cannot erase it, reformat it, or reuse it as a general purpose USB storage device.

Honestly, thumb drives are dirt cheap these days—why would you want to lose your only way to reinstall your OS?

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/agree "How do I reformat my restore DVDs so I can save what I want on them?" -- Are you crazy? – ghoppe Oct 25 '10 at 23:27
I don't have a macbook air, but I do have the cool little usb stick. I want to use it for other files. I realize that it's hard to format it (I tried), but I want to know how. – Jonathan Mayhak Oct 26 '10 at 0:18
The Readonly could maybe be bypassed if you manage to open it, but that will probably break it anyway so I’d say you save it as a keyring :) – Martín Marconcini Oct 26 '10 at 7:09
If it's emulating a CD drive, there are lots of reasons reformatting it is desirable. A thumbdrive which shows up as a hardware CD drive is great for installing OSes on all the computers which can't use bootable usb hard drives, but support USB CD drives (LOTS of early netbooks). – Fake Name Jan 2 '11 at 4:57
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Fake Name: The problem is the CD emulation is just in software. What's really going on is that it's a Flash ROM in hardware, which the software exposes as a CD drive for simplicity's sake. It also doesn't show up as a CD drive at the BIOS, only in an OS. – Jason Salaz♦ Feb 12 '11 at 22:47
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