There are a number of differences between FAT32 and NTFS. If you are installing a Windows operating system with the CD you can only format a hdd with a maximum size of 32GB. The maximum file size of FAT32 is 4GB (minus one null byte), that's about the size of a short movie. FAT32 doesn't have file security.
The list goes on, you can read this
article for all of the differences, or at least most of them. If you want more information simply google FAT32 vs NTFS.
As far as switching, you can switch FAT32 to NTFS, but you can't switch from NTFS to FAT32.