http://en.wikipedia.org/wiki/ReadyBoost

For a device to be compatible and useful it must conform to the following requirements:

• The capacity of the removable media must be at least 256 MB (250 after formatting)
• Devices larger than 4 GB will have only 4 GB used for ReadyBoost
• The device should have an access time of 1ms or less
• The device must be capable of 2.5 MB/s read speeds for 4 KB random reads spread uniformly across the entire device and 1.75 MB/s write speeds for 512 KB random writes spread uniformly across the device
• The device must have at least 235 MB of free space
• NTFS and FAT32 are supported
• The initial release of ReadyBoost supports one device
• The recommended amount of memory to use for Windows ReadyBoost acceleration is one to three times the amount of random access memory (RAM) installed in your computer

http://blogs.msdn.com/tomarcher/archive/2006/06/02/615199.aspx

Q: What perf do you need on your device?
A: 2.5MB/sec throughput for 4K random reads and 1.75MB/sec throughput for 512K random writes

Q: My device says 12MB/sec (or 133x or something else) on the package but windows says that it isn't fast enough to use as a ReadyBoost device... why?
A: Two possible reasons:

1. The numbers measure sequential performance and we measure random. We've seen devices that have great sequential perf, but horrible random
2. The performance isn't consistantly fast across the entire device. Some devices have 128M of lightning fast flash and the rest of the device is really slow. This is fine for some applications but not ReadyBoost.