A file system is the underlying structure your computer uses to organize data on a hard disk or partition. If you're installing a new hard disk in your computer, you need to format
it using a file system before you can use it. In Windows 7, there are three file system options you can choose from: NTFS, FAT32, and the older and rarely-used FAT (also known as FAT16).
For more information about formatting a hard disk, see Formatting disks and drives: frequently asked questions.
NTFS is the preferred file system for Windows 7. It has many benefits over the earlier FAT32 file system, including:
The ability to recover from some disk-related errors automatically
Improved support for larger hard disks
Better security because you can use permissions and encryption to restrict access to specific files for certain users
You can usually convert a partition to NTFS from a different type of file system. To learn how, see Convert a hard disk or partition to NTFS format.
FAT32 (and the lesser-used FAT) was used in some earlier versions of Windows, and is currently used for most USB flash drives. FAT32 doesn't
have the same security-related features as NTFS, so if you have a FAT32 hard disk or partition in Windows 7, anyone who has access to your computer can read any file on it. FAT32 also has size limitations. You
can't create a FAT32 partition greater than 32 gigabytes (GB), and you can't store a single file that's larger than 4 GB on a FAT32 partition.
The main reason to format a hard disk or partition with FAT32 is if you will sometimes want to run Windows 95, Windows 98, or Windows Millennium Edition on your computer, and at other times run Windows 7. This type of configuration is known as a multiboot configuration. If you want to set up a multiboot configuration like this, you'll need to install the earlier operating system on a FAT32 (or FAT) partition and ensure that it's a primary partition (one that can host an operating system). Any additional partitions that you need to access when using the earlier versions of Windows must also be formatted using FAT32.
You can usually convert a partition to FAT32 from a different type of file system. To learn how, see Convert a hard disk or partition to FAT32 format.