Every USB flash drive from your old 16 meg drive to your 1 gig drive, to your brand new 32 gig drive, is made up of three main parts.
The first part is the one you're probably most familiar with, the board. The board holds all of the internal components and includes the USB connector, the most recognizable part of a USB drive. The board transfers power and data to and from the USB.
The second component is the memory storage chip. This is where all the files are stored on the USB. The chip is called NAND Flash memory, which is why we call them flash drives. The capacity of the storage chip determines the capacity of the drive. Some drives have multiple memory chips for even greater capacity.
The controller chip is the third component. It's also located inside the drive. The name pretty much says it all as this multitasking circuit controls all of the drive's functions. The controller chip is in charge of retrieving the information from the drive, as well as determining how to read and write to the storage chip.
Board, storage and controller, together, these three parts give you a solid foundation for any working USB drive.
Useful sites about USBs: