Using an external hard drive to store and edit videos?

Hi
I have read many articles that suggest placing all video projects/events in an external hard drive to save space on my Mac Book or Mac Air.
I just ordered this: http://www.amazon.com/Western-Digital-Passport-Ultra-Portable/dp/B00E055H5O/ref= sr_1_1?s=pc&ie=UTF8&qid=1429627818&sr=1-…
So, how should I format/set up the external?
If I save projects/events on the external, can I come back and edit projects/events that only live in the external drive?
I also want to be able to take the external to whomever's computer to import videos shot by other cameras stored in other peoples computers. Is this ok?
I would be using either iMovie or Final Cut Pro.
Thank you.
Sebastian

To add to Karsten's post - Libraries on an external drive behave just the same as those on the boot drive.  (Like many people, I have all of mine on an external drive).
If you connect the external drive to another computer to use with iMovie or FCPX make sure that the other computer is using exactly the same version of iMovie or FCPX.   This because some updates to both programs (even minor 'third-digit' updates) have required events from earlier versions to be updated.  This cannot be reversed and updated events will no longer work with earlier versions.
Geoff.

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