NTFS or New Technology File System was developed and used with Windows NT 4.0 and now in Windows 2000/XP/2003 and is way advanced. Compared to FAT 32 , it gives slower bootup times but applications start faster when loaded. NTFS is less prone to crashes but if your Windows does get corrupted [which is rare], you’ll get a difficult time repairing it. In this case you have to run the Recovery Console from the Windows CD, as Windows startup disks are not able to access NTFS partitions. NTFS has built-in fault tolerance capabilities that record changes to your hard disk so it can repair your data incase of power failure and therefore maintains a huge log file. NTFS repairs hard disk errors automatically. If it can’t write to a particular section it will routinely mark it as a bad sector. With NTFS, you can set permissions for accessibility on individual files and folders for security reasons, you can’t with FAT32. You can set disk quotas that let you define how much hard disk space you want to allocate to the users. With Windows XP using FAT32 you are limited to partition sizes up to 32GB. However gaming performance is better in systems using FAT32 file system than NTFS.
If you are a home user running Windows XP, you can live with FAT32. You can create users for your whole family and maintain privacy as long as each user saves personal documents in their respective namesake “My Documents” folder. If you a Network Administrator or use your computer in a work/study environment then it must have NTFS partitions in order to take advantage of the great security/access features supported with it.