NTFS V/s FAT check this..

NTFS vs FAT
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.

FAT32

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, myself included, 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.