The best way to avoid leaving traces of your computer activities on the hard disk is by using RAM memory that can not be recovered after switching off your computer. You can accomplish this surfing the Internet with a live DVD/CD, and if you add an anonymous proxy like tor to that live operating system, you have a terrific hard to beat anonymity tool.
List of Anonymous Live CD/DVD
WARNING: The only active project are Tails and Whonix, the other live CDs have not been updated for years and without security updates you will endanger your security using them.
- The Amnesic Incogmico Live System(Tails): Anonymous Linux live DVD based on Debian and it also works as a live USB, the operarting system routes all outgoing connections to the Internet through the tor network, it is impossible for all applications to connect to the Internet with your real IP, it also contains Pidgin with OTF plugin for anonymous IM chat and ClawsMail with OpenPGP. No default root password.
- Mandragora Linux: Gnome desktop built on Ubuntu, to be used for digital forensics during incident response and vulnerability assessments. It comes with hacking tools like nmap (port scanner), Wireshark (packet sniffer), Kismet (Wi-Fi monitoring) and enhancing privacy tools like the tor proxy, torchat and i2P.
- Ubuntu Privacy Remix: Anonymous live DVD/USB based on Ubuntu Linux and not intended for permanent installation on hard disk, its modified kernel ensures that no network hardware can connect to the Internet, this operating system can not be used for Internet surfing, it is intended to view and create data that can be stored in an encrypted container using the included Truecrypt.
- Privatix: Portable encrypted operating system based on Debian Linux and including a browser, email client, word processor, image viewer and PGP keys for encryption, anonymous internet browsing is accomplished using tor, Firefox and the torbutton. Personal data and settings can be stored encrypted inside any external device like a thumbdrive.
- Liberté Linux: Lightweight Linux distribution based on Gentoo, it can be installed on a USB thumbdrive or use as a live CD, the system has been designed for cover communications with a unique IM system called cables relying messages through the tor network. Internet surfing anonymizes your IP with tor, data and settings can be saved encrypted using LUKS. Liberté Linux root password is: liberte.
- Ipredia OS: Operating system around the I2P anonymous network, you can visit .i2p websites not accessible from the regular internet and browse websites with a proxy IP without any configuration. Suitable for anonymous file sharing, the live CD can be installed to your hard drive.
Conclusion on Anonymous Live CD
The main downside of using a live CD is that you will not be able to store the settings, I recommend you choose a Linux distribution such as Incognito that comes with Truecrypt. This way you can create an encrypted partition where all settings and downloads can be stored. If you live in a country such as the United Kingdom where you must provide your password to your encrypted data when the Government asks you for it, then create an encrypted partition with Truecrypt through the live CD, it will not be possible to prove beyond reasonable doubt that the partition is encrypted, under forensic analysis by a tool like Encase everything will look like random data or a wiped partition.
When using a live CD remember that laboratory research by the Princeton University managed to recover RAM memory with a cold boot attack under some very specific circumstances, this is unlikely to happen as it is exceptionally difficult, but not impossible.