The FAT32 file system was introduced in the second version of Windows 95, often know as Windows 95B or OSR2. It is really just an extension of the original FAT16 file system in order to remain compatible with existing programs, networks, and device drivers. The biggest improvement in FAT 32 is its ability to efficiently manage storage space on today's larger hard drives. It can handle disks larger than 2GB and format them with a single partition thereby allowing you to assign a single drive letter to your drive.
In addition, the FAT 32 file system only uses a 4KB cluster size for all hard disks under 8 Gigabytes. This reduces the amount of slack space found on your hard disk when you save small files to your drive. As mentioned earlier, a 1KB file takes up 32KB of space on a 1GB hard disk using the old FAT 16 file system. However, a 1KB file on the same hard disk using the FAT32 system takes up only 4KB of space, a savings of 28KB. This may sound trivial, but when you are dealing with an entire hard disk that has thousands of files, the savings is actually dramatic and even Microsoft claims that you will achieve at least 10 to 15 percent more efficient use of disk space on the average large hard disk.
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