This is the official way as described in the 70-680 Microsoft book to make a Windows 7 USB install media.

1. Connect the USB storage device to the computer.
2. Open an elevated command prompt and type diskpart.
   This can be done by typing cmd in the start menu search box and press ctrl+shift+enter or just locating ‘Command Prompt’ under All Programs / Accessories and right clicking followed by clicking on ‘Run As Administrator’.
3. DISKPART> list disk
4. DISKPART> select disk F (Or whatever unit identifier your USB drive has)
5. DISKPART> clean
6. DISKPART> create partition primary
7. DISKPART> format fs=fat32 quick
8. DISKPART> active
9. DISKPART> exit
10. Copy all files from the Windows 7 installation dvd (or unpack the ISO file) to the USB drive.
11. Set your BIOS to boot from the USB drive.

Though you can also use the Microsoft USB / DVD Installation tool, which i have linked to from HERE.