The NTFS file system, introduced with first version of Windows NT, is a completely different file system from FAT. It provides for greatly increased security, file–by–file compression, quotas, and even encryption. It is the default file system for new installations of Windows XP, and if you're doing an upgrade from a previous version of Windows, you'll be asked if you want to convert your existing file systems to NTFS. Don't worry. If you've already upgraded to Windows XP and didn't do the conversion then, it's not a problem. You can convert FAT16 or FAT32 volumes to NTFS at any point. Just remember that you can't easily go back to FAT or FAT32 (without reformatting the drive or partition), not that I think you'll want to. The NTFS file system is generally not compatible with other operating systems installed on the same computer, nor is it available when you've booted a computer from a floppy disk. For this reason, many system administrators, myself included, used to recommend that users format at least a small partition at the beginning of their main hard disk as FAT. This partition provided a place to store emergency recovery tools or special drivers needed for reinstallation, and was a mechanism for digging yourself out of the hole you'd just dug into. But with the enhanced recovery abilities built into Windows XP (more on that in a future column), I don't think it's necessary or desirable to create that initial FAT partition.
