FAT VS NTFS. WHICH FILE SYSTEM IS TO BE CHOSEN

FAT16, FAT32 and NTFS each use different cluster sizes depending on the size of the volume, and each file system has a maximum number of clusters it can support. The smaller the cluster size, the more efficiently a disk stores information because unused space within a cluster cannot be used by other files; the more clusters supported, the larger the volumes or partitions that can be created.
The table below provides a comparison of volume and default cluster sizes for the different Windows file systems still commonly in use:

Which File System to Choose?

As much as everyone would like for there to be a stock answer to the selection question, there isn't. Different situations and needs will play a large role in the decision of which file system to adopt. There isn't any argument that NTFS offers better security and reliability. Some also say that NTFS is more flexible, but that can get rather subjective depending on the situation and work habits, whereas NTFS superiority in security and reliability is seldom challenged. Listed below are some of the most common factors to consider when deciding between FAT32 and NTFS.

• Security

FAT32 provides very little security. A user with access to a drive using FAT32 has access to the files on that drive.
NTFS allows the use of NTFS Permissions. It's much more difficult to implement, but folder and file access can be controlled individually, down to an an extreme degree if necessary. The down side of using NTFS Permissions is the chance for error and screwing up the system is greatly magnified.
Windows XP Professional supports file encryption.

• Compatibility

NTFS volumes are not recognized by Windows 95/98/Me. This is only a concern when the system is set up for dual or multi-booting. FAT32 must be be used for any drives that must be accessed when the computer is booted from Windows 95/98 or Windows Me.
An additional note to the previous statement. Users on the network have access to shared folders no matter what disk format is being used or what version of Windows is installed.
FAT and FAT32 volumes can be converted to NTFS volumes. NTFS cannot be converted to FAT32 without reformatting.

• Space Efficiency

NTFS supports disk quotas, allowing you to control the amount of disk usage on a per user basis.
NTFS supports file compression. FAT32 does not.
How a volume manages data is outside the scope of this article, but once you pass the 8GB partition size, NTFS handles space management much more efficiently than FAT32. Cluster sizes play an important part in how much disk space is wasted storing files. NTFS provides smaller cluster sizes and less disk space waste than FAT32.
In Windows XP, the maximum partition size that can be created using FAT32 is 32GB. This increases to 16TB (terabytes) using NTFS. There is a workaround for the 32GB limitation under FAT32, but it is a nuisance especially considering the size of drives currently being manufactured.

• Reliability

FAT32 drives are much more susceptible to disk errors.
NTFS volumes have the ability to recover from errors more readily than similar FAT32 volumes.
Log files are created under NTFS which can be used for automatic file system repairs.
NTFS supports dynamic cluster remapping for bad sectors and prevent them from being used in the future.
The Final Choice

As the prior versions of Windows continue to age and are replaced in the home and workplace there will be no need for the older file systems. Hard drives aren't going to get smaller, networks are likely to get larger and more complex, and security is evolving almost daily as more and more users become connected. For all the innovations that Windows 95 brought to the desktop, it's now a virtual dinosaur. Windows 98 is fast on the way out and that leaves NT and Windows 2000, both well suited to NTFS. To wrap up, there may be compelling reasons why your current situation requires a file system other than NTFS or a combination of different systems for compatibility, but if at all possible go with NTFS. Even if you don't utilize its full scope of features, the stability and reliability it offers make it the hands down choice.