FAT16: File Allocation Table (FAT) is a file system that was developed for MS-DOS and used in consumer versions of Microsoft Windows up to and including Windows Me. FAT32: Newer version of the FAT file system, based on 32-bit integers. The file system is able to handle partitions of 2 TB size and uses the storage capacity more efficiently than FAT16. NTFS: Short for NT File System, one of the file system for the Windows NT operating system (Windows NT also supports the FAT file system). NTFS has features to improve reliability, such as transaction logs to help recover from disk failures. To control access to files, you can set permissions for directories and/or individual files. NTFS files are not accessible from other operating such as DOS. http://en.wikipedia.org/wiki/NTFS

To elaborate on ChosenOne's answer: NTFS provides greater security (albeit not great security) than the previous FATs. FAT32 is actually able to handle up to 8 terabytes. NTFS handles time stamps differently than FAT (it uses UTC stamps and converts to the user's time zone) and it supports up to ~256TB and 2TB files.

Differences between FAT32 and FAT16: • FAT32 allows finer allocation granularity (approximately 4 million allocation units per volume). • FAT32 allows the root directory to grow (FAT16 holds a maximum of 512 entries, and the limit can be even lower due to the use of long file names in the root folder). Advantages of FAT16 Advantages of FAT16 are: • MS-DOS, Windows 95, Windows 98, Windows NT, Windows 2000, and some UNIX operating systems can use it. • There are many tools available to address problems and recover data. • If you have a startup failure, you can start the computer with an MS-DOS bootable floppy disk. • It is efficient, both in speed and storage, on volumes smaller than 256 MB. Disadvantages of FAT16 Disadvantages of FAT16 are: • The root folder can manage a maximum of 512 entries. The use of long file names can significantly reduce the number of available entries. • FAT16 is limited to 65,536 clusters, but because certain clusters are reserved, it has a practical limit of 65,524. Each cluster is fixed in size relative to the logical drive. If both the maximum number of clusters and their maximum size (32 KB) are reached, the largest drive is limited to 4 GB on Windows 2000. To maintain compatibility with MS-DOS, Windows 95, and Windows 98, a FAT16 volume should not be larger than 2 GB. • The boot sector is not backed up. • There is no built-in file system security or file compression with FAT16. • FAT16 can waste file storage space in larger drives as the size of the cluster increases. The space allocated for storing a file is based on the size of the cluster allocation granularity, not the file size. A 10-KB file stored in a 32-KB cluster wastes 22 KB of disk space. Advantages of FAT32 FAT32 allocates disk space much more efficiently than previous versions of FAT. Depending on the size of your files, there is a potential for tens and even hundreds of megabytes more free disk space on larger hard disk drives. In addition, FAT32 provides the following enhancements: • The root folder on a FAT32 drive is now an ordinary cluster chain, so it can be located anywhere on the volume. For this reason, FAT32 does not restrict the number of entries in the root folder. • It uses space more efficiently than FAT16. FAT32 uses smaller clusters (4 KB for drives up to 8 GB), resulting in 10 to 15 percent more efficient use of disk space relative to large FAT16 drives. FAT32 also reduces the resources necessary for the computer to operate. • FAT32 is more robust than FAT16. FAT32 has the ability to relocate the root directory and use the backup copy of the FAT instead of the default copy. In addition, the boot record on FAT32 drives has been expanded to include a backup of critical data structures. This means that FAT32 volumes are less susceptible to a single point of failure than FAT16 volumes. Disadvantages of FAT32 Disadvantages of FAT32 include: • The largest FAT32 volume Windows 2000 can format is limited in size to 32 GB. • FAT32 volumes are not accessible from any other operating systems other than Windows 95 OSR2 and Windows 98. • The boot sector is not backed up. • There is no built-in file system security or compression with FAT32. * You cannot format a volume larger than 32 gigabytes (GB) in size using the FAT32 file system during the Windows XP installation process. Windows XP can mount and support FAT32 volumes larger than 32 GB (subject to the other limits), but you cannot create a FAT32 volume larger than 32 GB by using the Format tool during Setup. If you need to format a volume that is larger than 32 GB, use the NTFS file system to format it. Another option is to start from a Microsoft Windows 98 or Microsoft Windows Millennium Edition (Me) Startup disk and use the Format tool included on the disk. If you have a hard drive over 40 gig in size, be certain to choose the option NTFS. * Clusters cannot be 64 kilobytes (KB) or larger. If clusters are 64 KB or larger, some programs (such as Setup programs) may incorrectly calculate disk space. Your hard drive may not appear to be as big as it really is when using FAT32; so when given a choice, use NTFS. * Windows XP supports three file systems for fixed disks: FAT16, FAT32, and NTFS. It is recommended that you use NTFS with Windows XP because of its advanced performance, security, and reliability features. When given a choice, choose NTFS since it is more reliable and secure! * Some older programs that were not written for Windows NT 4.0 or Windows 2000 may exhibit slow performance after you convert the FAT32 file system to NTFS. This behavior does not occur on a clean partition of NTFS. It is best to format your hard drive and choose the NTFS file system, instead of converting an existing drive from NTFS without a format. * If you run other Windows operating systems on your computer in addition to Windows XP, note the following issues: Only Microsoft Windows 2000 and Windows XP have full access to files on an NTFS volume. Also, Microsoft Windows Millennium Edition (Me), Windows 98 Second Edition and earlier, and MS-DOS cannot access files on an NTFS volume. If you set up a dual boot system, when you boot into your old Win Me/98/95 you will not be able to see or access any of the files on the drive that is NTFS. You will be able to see and access files on the Me/98/95 drive when booting into XP. If you don't understand what dual-boot is, or if you do not have very specific reasons to set up a dual boot system, don't do it!! If you do have a dual boot system, and you want to be able to access files on a FAT32 drive, don't use NTFS * What is Microsoft's recommendation on this? NTFS is the recommended file system for computers running the Microsoft Windows XP and Windows .NET Server operating systems. NTFS offers many end-user benefits related to functionality, security, stability, availability, reliability, and performance. NTFS, which was originally introduced with Microsoft Windows NT® 3.1, has always provided advanced file system features such as security, transacted operations, large volumes, and better performance on large volumes. Such capabilities are not available on either FAT16 or FAT32 Microsoft highly recommends you choose NTFS * Boot time with FAT32 is increased in hard drives larger then 32 GB because of the time required to read all of the FAT structure. This must be done to calculate the amount of free space when the volume is mounted. Read/write performance with FAT32 is affected because the file system must determine the free space on the disk through the small views of the massive FAT structure. This leads to inefficiencies in file allocation. If your hard drive is larger then 32 GB, use NTFS for best performance. ************************************** Ok, that is allot of information! What is all this about choices between NTFS and FAT 32 anyway?? During Setup, Windows XP gives you the choice of the Windows NT file system (NTFS) or one of the file allocation table file systems (FAT or FAT32). NTFS is the recommended file system with Windows XP. It offers better reliability, security, and support for hard disks over 32 gigabytes. If you want to multiboot with an older version of Windows, choose FAT 32. You can convert to NTFS after Windows XP installation, but you cannot convert back to FAT32. If the above answer to the question is not very clear to you, if you are planning on purchasing XP, we recommend you format your hard drive to the NTFS option when given the choice during your setup of XP and DO NOT choose a dual boot system! Be sure to back up any files you want to save, such as your documents, saved files, pictures, etc. as they will be lost if you choose to format.