Take a good look at this picture, taken from page 50 of the confidential HTC Touch Diamond service manual. It shows how to flash the HTC Diamond’s ROM via SD card. Of course the HTC Touch Diamond has no external storage, so the only way to connect it up is to attach it to an external card reader via the USB plug.
Most devices that can do this have USB Host enabled, meaning the phone can be attached to external memory sticks, keyboards and even mice. Of course the Diamond is an unlikely candidate for such a Frankenstein transformation, but being easily able to transfer files from a memory stick should be attractive even to Diamond-clutching fashionistas.
Unfortunately early testing so far shows simply connecting a USB memory stick to the device while the OS is running does not cause anything to show up in file explorer, but if the hardware is present and enabled its usually just a question of getting the correct drivers. I am sure the ever busy horde over at XDA-Developers are already hard at work on this.