Create a disk image that works in Windows
Disk images have far more widespread uses than this though. They can be used to create a exact copy of any CD, DVD or hard drive and turn it into a single .dmg file. You can then transfer this file around, and then simply double-click on it to mount the disk image. The most common uses of this are to create backups, to create a file for burning to CD/DVD, or to transfer the entire contents of a hard drive from one computer to another.
Unfortunately, the dmg type disk images that Mac OS X uses are not really Windows friendly. The cross-platform standard for disk images is the ISO format. These can be created on your Mac, and can be read by any Mac or Windows PC. This is especially useful if you want to burn a CD or DVD and your Mac doesn't have a burner but your PC does.
The first step in creating an ISO image is to make a folder of all the things you want to be in your disk image. Next, open up Disk Utility, located in the Utilities folder in the Applications folder. In Disk Utility, choose "New... Disk Image from Folder" from the File menu, or hit Command-Shift-N. Choose your folder, and then select a name for your image. Choose "DVD/CD master" from the Image format pop-up menu, and leave the Encryption as none. Click Save, and you're almost done.
You have created an ISO image, but strangely Disk Utility gives it the .cdr extension instead of the standard .iso extension. To avoid confusing Windows PCs, just rename your image with the .iso extension and you're done.
If you already have a normal Mac .dmg disk image, it's just as easy to convert it to .iso using Disk Utility. Just select Convert from the toolbar or the Images menu. Use the same settings as above, and remember to change the file extension to .iso.
For those of you who love the command line, you can convert disk image formats using hdiutil. This has the benefit of not requiring you to change the extension, but probably won't work out any quicker as the process is so straightforward in Disk Utility.
To convert from DMG to ISO, open up Terminal (in Applications/Utilities) and type:
hdiutil convert /path/to/image.dmg -format UDTO -o /path/to/newimage.iso
Replace the two paths with the location of the image and the place you want to save the new image. For example I would use /Users/matt/Desktop/image.dmg. To avoid mistakes, you can just drag the image to the Terminal and it will enter the path for you.
To convert from ISO to DMG, just use the following instead:
hdiutil convert /path/to/image.iso -format UDRW -o /path/to/newimage.dmg