Nopes! that’s not the case. Live CD is an interesting concept in which the whole operating system runs from the CD without installing anything on the hard disk. Its a great way to test any new OS without the fear of messing things up. Just pop in the CD and the magic starts!. Also when u have messed up u r system real bad then the Live CD can be of great help in performing system rescue. The only negative point which i feel is at times the OS can feel a but sluggish due to the drive speed. Also valuable RAM is consumed by the OS since the whole OS runs from RAM and not from hard disk.
The most popular and one of the very first Live CD distribution was that of KNOPPIX.
Nowadays almost all the popular distribution have their Live CD versions . Ubuntu, Debian are also the popular ones.
If u need more info on Live Cd’s the following wikipedia link can be of gr8 help . http://en.wikipedia.org/wiki/LiveCD