The File system comes with Windows NT. (NT File System) An optional file system for Windows NT, 2000, XP and Vista. NTFS is the more advanced file system, compared to FAT32. It improves performance and is required in order to implement numerous security and administrative features in the OS. NTFS supports Active Directory domain names and provides file encryption. Permissions can be set at the file level rather than by folder, and individual users can be assigned disk space quotas. NTFS is designed to log activity and recover on the fly from hard disk crashes. It also supports the Unicode character set and allows file names up to 255 characters in length. See FAT32 and file system.

NTFS compared to FAT and FAT32

NTFS has always been a more powerful file system than FAT and FAT32. Windows 2000, Windows XP, and the Windows Server 2003 family include a new version of NTFS, with support for a variety of features including Active Directory, which is needed for domains, user accounts, and other important security features.
FAT and FAT32 are similar to each other, except that FAT32 is designed for larger disks than FAT. The file system that works most easily with large disks is NTFS.

The following will describes the compatibility of each file system with various operating.

NTFS :
A computer running Windows 2000, Windows XP, or a product in the Windows Server 2003 family can access files on a local NTFS partition. A computer running Windows NT 4.0 with Service Pack 5 or later might be able to access some files. Other operating systems allow no local access.

FAT :
Access to files on a local partition is available through MS-DOS, all versions of Windows, and OS/2.

FAT32 :
Access to files on a local partition is available only through Windows 95 OSR2, Windows 98, Windows Millennium Edition, Windows 2000, Windows XP, and products in the Windows Server 2003 family.

The following are comparison of disk and file sizes possible with each file system.

NTFS :
Recommended minimum volume size is approximately 10 MB. Maximum volume and partition sizes start at 2 terabytes (TB) and range upward. For example, a dynamic disk formatted with a standard allocation unit size (4 KB) can have partitions of 16 TB minus 4 KB. Cannot be used on floppy disks.

Maximum file size is potentially 16 TB minus 64 KB, although files cannot be larger than the volume or partition they are located on.

FAT :
Volumes from floppy disk size up to 4 GB. This file system does not support domains controller.
Maximum file size is 2 GB.

FAT32 :
Volumes from 33 MB to 2 TB can be written to or read using products in the Windows Server 2003 family.
Volumes up to 32 GB can be formatted as FAT32 using products in the Windows Server 2003 family.
Does not support domains controller.
Maximum file size is 4 GB.