A Windows XP question that comes up frequently in each user’s mind is “Which format is the best one to use: NTFS or FAT?”. The answer obviously is “Depends on where you are using the Operating System?”
FAT stands for File Allocation Table, and it dates way back to DOS days, when the operating system fit on a single 360k / 1.44Mb floppy. Just think of it, as the amount of floppies required to boot into XP.. ;). Beginning with Windows 95 SR-2, FAT was upgraded from 16 bit to 32 bit, and so when we refer to FAT, we are actually talking (these days) about FAT32, not FAT16. FAT32 overcame some of the inherent limitations of FAT16 disk and volume sizes, as well as directory entry restrictions, long filename restrictions, and large cluster sizes, which wasted large amounts of disk space when storing small files. FAT32 volumes, in theory, can range in size from less than 1 MB up to 2 TB (TeraBytes). FAT32 is the native file system of Windows 98 and Windows ME, although it is supported by Windows XP/2000.
NTFS, or New Technology Filling System, is the native file system of Windows NT Windows 2000, and Windows XP. NTFS is a “journaling” filing system, which means that it is less likely to become corrupt, and will recognize errors or bad sections of disk and correct itself automatically. NTFS volumes can only be accessed (directly, not through shares) by Windows 2000 and later versions (NT/XP), without the aid of third-party softwares. Because of the larger overhead, NTFS cannot be used on floppy disks, and the minimum recommended size for an NTFS volume is 10 MB. However, the maximum supported volume size is 2 TB, and there is no limit on the file size. NTFS also supports file encryption, file compression, file permissions and auditing, as well as many fault-tolerant disk configurations such as mirroring and RAID 5.