The USB physical form-factor and electrical signals were 1996 but the protocol for storage devices appears to be later in 1998:
Universal Serial Bus Mass Storage Class Specification Overview V1.0 Revision October 22, 1998 : https://cscott.net/usb_dev/data/devclass/usbmassover_10.pdf
Back in the day, some of my friends called thumbdrives MSDs, because when you plugged one in, Windows would show a popup telling you that it found a new USB Mass Storage Device. I don't recall that initialism catching on with anybody.
These were then backported to 98SE, and pretty much every vintagecomputing enthusiast with a 98 box is running this despite the anachronism, because authenticity is just such a massive PITA.
https://vetusware.com/download/Universal%20USB%20Mass%20Stor...
In case you're in the market for such a hack. :)
Apparently, WinME actually introduced at least one evolutionary improvement that stuck around, and wasn't a complete dead-end.
I had some involvement with Windows 2000 from a professional product perspective--was even at the launch event--but don't think I ever seriously ran it as a desktop OS.
Windows 2000 was absolutely the OS to have until MS tightened XP with SP2.
ADDED: And as someone else mentioned, you sometimes downloaded drivers. Not everyone had broadband but Internet access was pretty common by then.
(Though, I think you could grab the winme usb drivers and plop them into a 98 install to get universal-ish usb mass storage, and later drives just ended up bundling a generic driver instead of a device specific one on the driver CD)
After installing that driver you'd be able to see the other partition.