Windows 8 and 8.1 allow creating a bootable Recovery Drive - USB disk that boots right into Recovery Environment (aka Limited Diagnostic Mode) that allows repairing problems, running System Restore and Refreshing or Resetting your PC.
The drive or media cannot be used to install Windows. It is very similar to Windows 7's System Repair Disc.
Recovery Drive (the USB version) or System Repair Disc (the CD/DVD version, only available in Windows 8) is meant for those who do not have a bootable Windows 8/8.1 DVD - this is a common case as there is no DVD bundled with computers that have Windows 8 or 8.1 preinstalled (the OEM versions of Windows).
It is strongly recommended to create the drive or disc before getting into trouble - if you cannot start Windows 8 or 8.1, you might be out of luck in repairing your PC.
Please bear in mind that a 32-bit (x86) Recovery Drive can only be used to fix 32-bit Windows 8/8.1 editions and a 64-bit (x64) Recovery Drive works with 64-bit Windows 8/8.1 editions only.
A good thing is that you can repair any edition of Windows 8/8.1 with this disc, as long as it is meant for the same hardware architecture (32-bit or 64-bit).
And last, but not least - do not try to use Windows 8.1 Recovery Drive for repairing Windows 8, and vice versa!
Remember that you cannot use Refresh or Reset Your PC features if Windows is installed on a drive with GPT (not MBR) partition table until you force "UEFI only" boot setting in BIOS/EFI. Windows 8 and 8.1 will not detect GPT partition alignment correctly if BIOS booting is enabled.
Creating the Windows 8/8.1 Recovery Drive or System Repair Disc
First, make sure you have a blank CD/DVD (only in Windows 8) or a USB drive with at least 256 MB (megabytes) of total disk space.
CD or DVD must really mean blank, because the program is not capable of overwriting rewritable media! You can blank a CD or DVD by opening Computer/This PC, right-clicking a CD/DVD writer in the list and selecting Erase this disc.
USB drive can be a simple pen drive (stick) or a USB hard drive. Please note that this drive will be formatted and you will lose all files on it. Do make a backup copy of your important files first!
After creating the Recovery Drive, you must test that your PC is actually able to boot from it. Several USB sticks do not support booting at all. Also, remember to check your computer's boot order to verify that booting from USB devices is enabled and listed before hard drive booting.
To create the drive, open Settings Search with keyboard shortcut Windows key+W and type "recovery" into Search box. Click Create a recovery drive.
As expected, User Account Control pops up. Click Yes to verify that you know what you're doing.
Create a recovery drive window opens. Insert a blank, writable CD or DVD (Windows 8 only), or connect a USB drive. Then click Next.
Windows 8 and 8.1 automatically detect available media after this.
If you want to create a bootable USB Recovery Drive, click the correct one in the Select the USB flash drive window. Then click Next.
Windows will then warn you that all contents of the selected drive will be deleted. To continue, click Create.
The drive formatting and file copying process might take several minutes, depending on the speed of your USB drive. After the drive is ready, click Finish.
Now test that your device is really able to boot from the Recovery Drive: some USB drives do not support booting. If this is the case, create Recovery Drive on a newer stick and re-test.
If you prefer to create a bootable CD or DVD System Repair Disc (possible in Windows 8 only), click the Create a system repair disc with a CD or DVD instead link in the bottom of the Connect a USB flash drive window.
Create a system repair disc window opens. Select the correct drive and click Create disc.
If you did not insert a CD or DVD, you will see the "System repair disc could not be created, There is no media in the device (0xC0AA0202)" error dialog. Click OK, insert a blank writable disc and the process will automatically start.
In case the inserted CD or DVD is not blank, you will see the following error dialog. Click OK. Then open Windows Explorer (keyboard shortcut Windows Key+E).
Right-click your CD or DVD writer and select Erase this disc.
In the Ready to erase disc window, activate the Close this wizard after the disc is erased option and click Next.
Creating the System Repair Disc might take several minutes. After the process is complete, label the disc as instructed and click Close.
You can then safely close all open Create a system repair disc and Recovery Drive windows.
Here's the list of files that a typical Windows 8 Recovery Drive or System Repair Disc contains. Yes, the CD/DVD and USB contents are identical.
To see the sources\boot.wim file in File Explorer, you might have to disable the Hide protected operating system files (Recommended) option temporarily. See the Change folder views and options in Windows article for instructions.