When you start your computer, you can get into the Bios, before the OS try to begin. Once you get into the Bios, as cmichael138 said, you have to set the USB as your 1st boot device. Then save it, and let it start through the USB device.
There are different types of "product keys" because there are different ways a professional might deploy Windows. As long as your friend gave you the right kind of key, and it is a legal unused key, I have no problems with helping you.
Anyone in a position to give you a valid and LEGAL key will also be in a position to download the correct version directly from MS.
digitalriver is also a legal distribution point for Win 7 downloads.