NTFS
NTFS is Superior for a couple reasons:
Is the native file system for WinNT/2k/XP.
Allows indexing which improves file searching (mostly, faster);
Has better security -- such as file-wise encryption (not supported by WinXP home) and per-user access rules
Supports user quotas
Has file-wise compression.
Is journaled, decreasing data loss (ScanDisk at start up unnecessary).
Uses Unicode (allows foreign and extended character) file names and natively supports long file names.
Supports larger files than FAT (greater than 4GB).
Allows larger volume sizes (greater than 1TB) There is talk about a theoretical limit of 16 Exabytes, and up to 2 Terabytes.
Supported format on dynamic disks Works well with large cache (greater than 96MB systems).
Is more space-efficient on large volumes (greater than 8GB).
Resistant to fragmentation.
and as JAMMAN said it is faster on all volumes over 8GB, below that and you wont benefit MUCH from the speed increase.,, the main reason for the speed increase it the way the NTFS file access is designed.
I would say you should use FAT if you have a:
A "slow" disk (less than 5400RPM) and/or controller (slower than ATA/33)
A volume of 8GB or less
A volume you want to use with a Win9x OS