FAT and NTFS are two file systems that have been in used in Windows OS for storing of data
You can still format your drive to FAT but NTFS is the preferred file system recommended for XP and Vista OS as it has support for larger volume sizes, FAT only supports 2GB partitions for FAT16 and 32 GB for FAT32.
FAT32 still has the file size limitations and max supported file size is 4GB , nowadays files such as mail storage PST can easily grow to that size.

NTFS has more security features and is less prone to disk fragmentation errors and is faster in performance. NTFS partition supports size up to 16 EB (Exabyte where an Exabyte is 1,024 TB).

Earlier FAT was useful for multi OS systems as Linux distros were not able to read/write data from NTFS, however this has changed now and you can mount NTFS drives easily in majority of the main stream Linux flavours.


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