Keyloggers can be defeated even if Incognito is running
inside VM. If passwords are stored in firefox built in password manager
then it will never be typed and then password is safe. Login password
or password for password manager may still be available to key loggers
however these passords are for your local VM machine.
I customized Incognito to meet following requirements
A system which can be carried on USB drive and as well have on home machine with ease of use.
Data must persist on USB drive and on home machine.
No home machine reboot for accessing internet, it creates adaptation barrier.
Not USB bootable - Old machines does not have USB boot capabilities or not enabled in BIOS.
A Virtual Machine, as name indicates, is special software layer which behaves
almost like a independent PC running on top of operating system. This Virtual PC can support another operating system.
For safe browsing, it is good idea to access internet on virtual
machines because there is layer between host operating system and guest operating system. A virtual machine can be used for unsafe browsing
as this machine can be destroyed without harming personal data. Of
course, data on virtual machine will be lost.
Another way is to use a virtual machine to access financial or sensitive
information. Virtualization layer between Host OS and Guest OS render
most of the hacking techniques ineffective. However, this technique
does not protect against key loggers as keyboard (or any computer
peripheral) is still controlled by Host OS. To prevent key loggers to
have access to personal information, a password manager can be used.
Please note, these machines are as effective as the user so always be
cautious regardless.
There are bunch of virtual machines available for free and few of them are listed here.
for $4.99.