Well here I am answering my own post.
Looks like they are using a CD to load the OS.

> -----Original Message-----
> From: Brian Densmore 
> Sent: Thursday, August 28, 2003 12:36 PM
> To: KCLUG (E-mail)
> Subject: Lindows PCs
> 
> 
> Anyone know anything about the guts of
> theses $169 PC sold by Lindows?
> They have no HD, so did they burn the OS
> onto a PROM? It's kind of an interesting
> idea. 
> 
> Brian 
> 
> Windows 95 - A 
> 32 bit extension to a 
> 16 bit shell for a 
>  8 bit operating system designed for 
>  4 bit computers by a 
>  2 bit company that can't stand 
>  1 bit of competition. 
> 
> 
> 
> majordomo@kclug.org
>