Mac OS Extended (Journaled) - This is the default file system format for Mac OS X drives.
Advantages: Formatting your USB flash drive this way will give you full interoperability with Macs. It also includes support for features from OS X Lion, such as Versions. You can even set up an OS X startup drive if you have the right files, the know-how, and a big enough flash drive, which will allow you to boot your Mac off an external disk if something goes wrong with your built-in drive. The "Mac OS Extended (Journaled)" option will have the highest degree of support for Mac OS X features, and there's no limit to the size of files you can put on the drive.
Disadvantages: Windows-running PCs can read files from drives formatted this way, but they can't write to them (at least not without the same amount of work it takes to get OS X to write to NTFS-formatted drives). If you're transferring files from Macs to PCs, this won't be an issue; however, transferring files from PCs to Macs won't be possible if your drive is formatted in "Mac OS Extended (Journaled)." If you will only be working with Macs and not PCs, this may not be an issue. Otherwise, you may need to consider one of the file formats discussed below.
MS-DOS (FAT) - This is Disk Utility's name for the FAT32 filesystem.
Advantages: FAT32 offers near-universal interoperability with virtually every computing system on the planet. A drive formatted this way can easily transfer files between Macs and PCs. You can also move files to video game systems like the PlayStation 3, Xbox 360, and Wii. Virtually all cameras and videocameras support FAT32, too. It's the closest thing we have to a universal file system format, which is why most flash drives are formatted this way right out of the box.
Disadvantages: FAT32 doesn't support files larger than 4 GB, and that's its greatest drawback. You also can't create a startup drive for your Mac using this format. Furthermore, FAT32 doesn't support OS X Lion's Versions feature -- something users have discovered the hard way when working directly off of files stored on a USB flash drive (something we recommend against doing). However, those downsides may be more than outweighed by FAT32's near-universal support, and if you don't think you're going to be dealing with files bigger than 4 GB, this may be the optimal choice.
ExFAT - A newer file format, supported in Mac OS X 10.6.5 or later.
Advantages: exFAT has many of the same advantages as FAT32 in that it's a disk format that offers interoperability between Macs and PCs. It has one big advantage over FAT32: exFAT supports file sizes larger than 4 GB, so if you have a need to move huge files between Macs and PCs, this is likely the format you'll want for your flash drive.
exFAT is supported by the following operating systems:
- Mac OS X Snow Leopard (10.6.5 or greater)
- OS X Lion
- Windows XP SP2 or later (with an additional update for exFAT support)
- Windows Vista SP1 or later
- Windows 7
Disadvantages: As a relatively newer file system format, exFAT isn't supported in older versions of Mac OS X (anything prior to 10.6.5) or anything older than Windows XP SP2. If you won't be dealing with older Macs or PCs, this may not be a problem. Of greater issue is that most consumer electronics (cameras, camcorders, video game systems) don't support exFAT, either. If you need to transfer files between your Mac and one of these non-PC devices, you're almost certainly going to have to format your flash drive in FAT32 instead.
The Bottom Line
Here's a basic rundown of which format we recommend for your USB flash drive, broken down by use case.
If you absolutely, positively will only be working with Macs and no other system, ever: Use Mac OS Extended (Journaled).
If you need to transfer files larger than 4 GB between Macs and PCs: Use exFAT.
In all other cases: Use MS-DOS (FAT), aka FAT32.