FAT32 is compatible with Windows 98, Me, 2000 and XP. It is also compatible with MacOS (all versions)
There are some limitations with FAT32 format
a) The maximum file size is 4GB. This can be a problem for video and backup of large system images.
b) Windows 2000 and XP cannot format partitions in FAT32 any larger than 32GB. You can only make FAT32 partitions of any size by using specialist software like Partition Magic.
c) MacOS cannot manage FAT32 partitions of greater than 137GB. So if you need a larger disk partitioned for dual Mac and PC use it would need to be split into 2 or more partitions(e.g. a 250GB disk can be split into 2 x 125GB partitions)
NTFS is compatible with Windows 2000 and Windows XP.
It is viewable "read only" with MacOS 10.3 and above.
There are no size limitations with NTFS, and because it is regarded as being faster than FAT32 it is always preferable to use it unless you need to use your disk with older Win98/Me or MacOS computers.
The HFS+ format used by Apple Macs cannot be read or written by any Windows PC