Yes, Sony Xperia 10 does support USB-OTG Connectivity and you can connect your USB Drive to it.
Before you connect the drive using OTG cable, you need to enable OTG support on the device.
To enable OTG :
Open Settings-> Additional Settings-> OTG connection. Here you need to enable the option.
Top 10 uses of OTG that will amaze you:
You can find complete specifications here: Sony Xperia 10