When running a LiveCD like Knoppix for example, you have some virtual disk space, which is actually located in your RAM. So you can install your application neatly, Knoppix will not affect your real hard disks (unless you explicitly mount them and make them writeable and do something with them).
The drawback is that after shutdown your installed application will be gone (it existed only in memory), so the next time you launch the LiveCD you have to install your application again. Knoppix actually allows you to store some personal data or applications to a real hard disk, as to avoid repeating setups, but it doesn't do it without your authorization.
linux