Yeah, It's true. You can host your Linux images (Ubuntu, Xubuntu, debian, fedora...) in your Android devices and boot from it. Now with DriveDroid, You don't need any dedicated USB drive or CDs/DVDs which are in a special format (FAT...) to be able to boot from. Everything you need to do are some super simple steps:
1. Install DriveDroid from the Google Play market: https://play.google.com/store/apps/details?id=com.softwarebakery.drivedroid&hl=en
2. Download any Linux Image you want. I recently host the Xubuntu in my Android phone with DriveDroid (http://xubuntu.org/). And then copy the image to /storage/sdcard0/Download/images .
3. On your Android phone, turn on DriveDroid, select the image to let your phone host the file over USB.
4. Restart your computer (make sure that you've set up to boot from USB as the first priority)
Note: You can host many Linux images on your phone with DriveDroid.