I've not had any problems with these devices for compatability. Mine's worked on Win 98, Linux Mandrake, Win XP and Win ME. It's file system is FAT32 and if you use it on a Win 98 PC you'll need to have a driver with you (I keep the driver in a floppy disk which I carry around with the "USB pen").
You can use it for backup purposes, and I store several program setup files and programs on it such as AVG7 setup, WS_FTP setup, Stock Control prog, etc. But if you're going to use them for backing up only, then its maybe just easier to burn your files onto a disc. USB Pens are quite expensive compared to CDs. Its a good piece of hardware for moving large files.