FAT32 is an old file system that is simple, well-documented, readable from a large number of OSs, and supported by a wide range of tools.
NTFS is a newer file system that is feature-rich, proprietary, undocumented at the raw bytes level, and subject to change - even within Service Packs of the same OS version.
You are obliged to use FATxx if you need access from DOS mode or Win9x, e.g. in a dual-boot scenario.
You are obliged to use NTFS if you need support for files over 4G in size, hard drives over 137G in size, and/or you need to implement some of NT's security management that devolves down to NTFS.
NTFS may be safer...
- transaction rollback cleanly undoes interrupted operations
- file-level permissions can protect data against malware etc.
- automatically "fixes" failing clusters on the fly (controversial)
...or more at risk...
- no interactive file system checker (a la Scandisk) for NTFS
- no maintenance OS for NTFS
- malware can drill right through NTFS protection, e.g. Witty
- transaction rollback does not preserve user data
- transaction rollback does not help other causes of corruption
- more limited range of maintenance tools
- automatically "fixes" failing clusters on the fly (controversial)
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