NTFS vs. FAT File System

To NTFS or not to NTFS—that is the question. But unlike the deeper questions of life, this one isn't really all that hard to answer.
For most users running Windows XP, NTFS is the obvious choice. It's more powerful and offers security advantages not found in the other file systems. But let's go over the differences among the files systems so we're all clear about the choice. There are essentially three different file systems available in Windows XP: FAT16, short for File Allocation Table, FAT32, and NTFS, short for NT File System.
FAT16 The FAT16 file system was introduced way back with MS–DOS in 1981, and it's showing its age. It was designed originally to handle files on a floppy drive, and has had minor modifications over the years so it can handle hard disks, and even file names longer than the original limitation of 8.3 characters, but it's still the lowest common denominator. The biggest advantage of FAT16 is that it is compatible across a wide variety of operating systems, including Windows 95/98/Me, OS/2, Linux, and some versions of UNIX. The biggest problem of FAT16 is that it has a fixed maximum number of clusters per partition, so as hard disks get bigger and bigger, the size of each cluster has to get larger. In a 2–GB partition, each cluster is 32 kilobytes, meaning that even the smallest file on the partition will take up 32 KB of space. FAT16 also doesn't support compression, encryption, or advanced security using access control lists.
The FAT32 file system, originally introduced in Windows 95 Service Pack 2, is really just an extension of the original FAT16 file system that provides for a much larger number of clusters per partition. As such, it greatly improves the overall disk utilization when compared to a FAT16 file system. However, FAT32 shares all of the other limitations of FAT16, and adds an important additional limitation—many operating systems that can recognize FAT16 will not work with FAT32—most notably Windows NT, but also Linux and UNIX as well. Now this isn't a problem if you're running FAT32 on a Windows XP computer and sharing your drive out to other computers on your network—they don't need to know (and generally don't really care) what your underlying file system is.
The Advantages of NTFS The NTFS file system, introduced with first version of Windows NT, is a completely different file system from FAT. It provides for greatly increased security, file–by–file compression, quotas, and even encryption. It is the default file system for new installations of Windows XP, and if you're doing an upgrade from a previous version of Windows, you'll be asked if you want to convert your existing file systems to NTFS. Don't worry. If you've already upgraded to Windows XP and didn't do the conversion then, it's not a problem. You can convert FAT16 or FAT32 volumes to NTFS at any point. Just remember that you can't easily go back to FAT or FAT32 (without reformatting the drive or partition), not that I think you'll want to.
The NTFS file system is generally not compatible with other operating systems installed on the same computer, nor is it available when you've booted a computer from a floppy disk. For this reason, many system administrators, used to recommend that users format at least a small partition at the beginning of their main hard disk as FAT. This partition provided a place to store emergency recovery tools or special drivers needed for reinstallation, and was a mechanism for digging yourself out of the hole you'd just dug into. But with the enhanced recovery abilities built into Windows XP (more on that in a future column), I don't think it's necessary or desirable to create that initial FAT partition.
When to Use FAT or FAT32 If you're running more than one operating system on a single computer , you will definitely need to format some of your volumes as FAT. Any programs or data that need to be accessed by more than one operating system on that computer should be stored on a FAT16 or possibly FAT32 volume. But keep in mind that you have no security for data on a FAT16 or FAT32 volume—any one with access to the computer can read, change, or even delete any file that is stored on a FAT16 or FAT32 partition. In many cases, this is even possible over a network. So do not store sensitive files on drives or partitions formatted with FAT file systems.