I could easily bore you with a load of technical jargon on this subject, however why bother? Its all about how we store files and folders, access them, compress them and more. FAT16 and FAT32 (File allocation table) have become outdated and NTFS is the latest development. NTFS is not exactly new either but its all we have.
Like all new technologies, NTFS was designed to be bigger and better than FAT32 in every way. It has better security features, enables compression, and allows the use of larger files. It is the default file system for new installations of Windows XP an windows Vista. .
Notes:
Hard drives formatted with NTFS are not recognized by Windows 95/98/Me.
FAT and FAT32 volumes can be converted to NTFS volumes. NTFS cannot be converted to FAT32 without reformatting.
FAT32 provides very little security. A user with access to a drive using FAT32 has access to the files on that drive.
NTFS supports file compression. FAT32 does not.
A FAT partition used to be created with emergency system files and drivers stored on it which would allow you to boot your system from a floppy disc. This is all not necessary now as Windows XP and Vista have come equipped with great self recovery abilities.