Windows NT introduced a new file storage system called NTFS. NTFS included fault tolerance and fixing hard disk errors on the fly. Since NTFS logs all changes to the file system, directory updates can be undone. After data is written to the disk, it re-reads that information to verify the data. The old FAT file system just wrote the data and assumed it recorded successfully. If NTFS discovers that the data was corrupt, NTFS would flag that portion of the drive and move the data elsewhere.

NTFS also supports file and directory based security. While not perfect, it was a major step up from the FAT system. NTFS can store files that are 16 Exabytes in length. The minimum partition size is about 50 Megs. NTFS includes real-time file compression. Compression is on a file by file basis. Compression is native to the file system, and NTFS favors speed over size when compressing. NTFS also attempts to save files in continuous blocks, so there is a marked decrease in fragmentation as compared to FAT. Third party vendors sell file defragmentation programs, such as Diskeeper. An additional benefit of NTFS is that it can have a volume span multiple physical disks.

Windows NT supports other file systems. NT has POSIX support and can also store Macintosh files on a server if the services for Macintosh are installed. NT also supports CDFS, the read-only CD file system.

If you decide to convert your old system to the NTFS file system, it is a one-way process. You cannot "un-do" it and go back to FAT. There are some third-party vendors with conversion utilities, but I've never had one work well enough to use the partition.

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