In case you haven’t seen this, Tails (The Amnesic Incognito Live System) is a live incognito DVD/USB which you can use to boot off any machine that supports USB boot (and for those which don’t boot of USB, you can use PLOP).

All connections go through Tor and since its a live disk, nothing is left on the hard disk (unless you choose to save something off the Internet, I guess).

I’ve been tinkering with Tor and managed to get my DNS routed through Tor, with my normal DNS as a backup, although routing traffic is a bit tricker, since not applications like to play with the Tor network properly. Some applications such as Vuze provide SOCKS capability, which allows routing of traffic through the Tor network via proxy. Others, like Chrome/Chromium don’t offer this as well, and you have to fudge it.