The best bet for most uses is FAT32 file system. For more security, other file systems are available, but you need to get third party software in order to allow windows or mac to read/write respectively.
NTFS (Windows NT File System) is the most advanced Windows system, developed for NT, and used in windows NT, 2000, XP & Vista. Macintosh systems can read NTFS, but cannot write to it unless third party software is installed. This software may come at a price (usually around $25-$30)
HFS+J (Mac OS Extended (Journaled)) is an advanced Macintosh file system that is probably the most secure way to go, however Windows systems cannot read or write to this file system unless third party software is installed.
FAT32 is an old windows file system that is used universally among many devices. This file system also has a size limit of 4GB. It can store many files as long as each single file is less than 4GB. On Windows VISTA, you cannot copy groups of small files totaling more than 4GB at a time. Macintosh and Windows systems, as well as other systems like Playstation 3 can Read and Write to FAT32 without third party software. There is no third party software available for Ps3 to date.
Here are some Third party Software choices that have been suggested my other macrumor members. I will recommend Paragons NTFS for mac, as I have tried it, and it worked for me. I was able to access an NTFS drive, remove important files, and then format it.
MacFuse & NTFS-3G
Paragons NTFS For Mac
Mac Drive (For Windows)
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Format Instructions:
Open Disk Utility (HDD/Applications/Utilities/Disk Utility.app)
When it opens, select the the External drive from the side bar, then select the "Partition" tab in the main window.
From here you can select how many partitions you want. If you wish to use the entire drive, select 1 partition. Under "Volume Information", enter a name, and select a file system. For FAT32, select "Ms-Dos File system".
You can now click the "Partition" button in the bottom right hand corner.
Small USB sticks may require an extra step in order for OS X to format it as FAT32. Their small size makes the OS format it as FAT16 (also ms dos).
To format a USB stick properly, follow the above steps, but before clicking "Partition" click on "Options..." and make sure "Master Boot Record" is selected.