what?
Are you talking about the iPod, specifically or exclusively?
In that case, "disk mode" could be referring to having it show up as a regular disk drive on the desktop, so you can access it like a regular Firewire drive, back up files to it, etc.
You switch this function on in the iPod preferences button in iTunes.
If you access it as a regular drive, then, yes, you can install a bootable system on it.
Booting from iPod isn't necessarily recommended, though, since running an OS is a very disk-intensive operation, and iPod drives/controllers aren't really designed for it.
-s*