What happens if you install a Steam game to a removable drive?

Short Answer

1. Install game on external
2. Unplug external > error (missing executable)
3. Plug in external > game works
4. Unplug external and restart Steam > game offers & requires installation
5. Plug in external > game offers & requires installation
6. Restart Steam > game works

Installing to the same directory when it offers & requires installation detects the game and the game will work.

Answer in Greater Detail

I installed VVVVVV on an external hard drive. The game played fine. I unplugged the drive and got this error:

(Unionhawk's image)

I plugged the external drive in again and the game worked fine again.

Then, I unplugged the external drive and restarted Steam. The game was listed as uninstalled. After plugging in the external drive, the game remained as uninstalled, and launching it would prompt installation (in addition to creating a new Steam library on the external drive). Installing to the same directory at this point immediately installs the game and it starts working again.

Restarting Steam also detected the game again and it played fine.

I like to answer every question that I can reasonably test exactly in that fashion; by reasonably testing them. So let the science begin.

I installed Super Meat Boy on a flash drive for this test. Normally, you would probably use an external hard drive, but the principle is the same. The game runs well, and I played a couple of levels, to see if saves would be affected.

I safely removed the drive and attempted to run Super Meat Boy again, and it gave me the following popup:

It still gives me the option to play by default though, and upon plugging the drive back in, I can play without any issue, saves are retained, and stored on the drive.