NTFS uses more disk space than FAT

Microsoft invented both NTFS and FAT file system
FAT is inherited from MS-DOS and Windows 95/98, while NTFS is inherited from Windows NT4. NTFS is the file system default Windows XP and Vista.

Myth:

People tend to think that NTFS uses more disk space than FAT.

Reality:

False NTFS does not occupy or use more disk space than FAT.

Explanation:

NTFS:
It is faster than FAT.
It is more secure than FAT (less risk of corruption)
has more features (support for international characters, security settings, auditing, compression, encryption, management of very large files).
NTFS is also more efficient: It manages more free space than FAT, and better optimizes the management of many files.

Just try it:

Take two equally sized partitions, format one in NTFS and the other one FAT and copy files over and verify the size occupied on disk.

E.g. Copying files Active Perl (3972 files, total 66.7 MB) on a 300 MB disk

These files occupy 76 607 488 bytes on a FAT drive.
These files occupy 67 628 032 bytes on a NTFS drive.

If we look at the free disk space 300 MB after copies of files:

238 051 840 bytes free on the NTFS drive.
235 298 816 bytes free on the FAT drive.

Conclusion:
Its recommended that you make use of NTFS than FAT if you really care about optimizing disk space.