Next up is the file system choice. In the File system: textbox, choose NTFS.
NTFS is the most recent file system available and is almost always the best choice. Only choose FAT32 (FAT - which is actually FAT16 - isn't available unless the drive is 2 GB or smaller) if you are specifically told to do so by a program's instructions that you're planning on using on the drive. This is not common.