USB Flash drives are fantastic little devices.
But as with everything you can and do get problems.
So far I have had the plastic break that held my 128Mb drive to the keyring. I have bent my 256Mb drive in half. and at work I have had a 256Mb drive die and not be recognised in any computer.
I was one of the tech's that supported a 600+ computer educational network, and I have seen quite a few problems there. Mostly it is users who dont use the Windows "Unplug or Eject Hardware" and just pull them out. This can corrupt data, loose files or corrupt the format on the drive. Sometimes you can reformat them and they will work again, sometimes bin them.
There are some brands I will not use now because of the problems I've seen with them, but I have found the majority to be very reliable.
I carry a 512Mb drive all the time, and I would highly recomend them.

But as always dont rely on only one backup. Add them with CD's or another form of backup.