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That was for show purposes. It was certainly intended to display OS capabilities while impressing people at the same time. Linux eventually came to dominate the live-cd scene in the early 2000's but, to this day, people still cute this demo as specially incredible. Actually, there was Linux with X11 and a functional browser that run from a floppy. And that is something that is really impressive: https://news.ycombinator.com/item?id=28515025

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I worked on one of the Linux live CDs (Linuxcare bootable business card / LNX-BBC), which we designed to fit in 50 megabytes. I remember being kind of jealous of the QNX floppy, because I felt that it had about 25% as much software functionality as we did, but in about 3% of the storage space!

I mean, basically we could interact with a lot more hardware, support more file formats, filesystems, and network protocols, and had more high-level scripting languages. But there still seemed to be a huge disproportion where the QNX floppy was just so much more space-efficient for what it did.

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