The FAT and FAT32 file system are case insensitive. NTFS simulates case insenitivity but can be made (forced is a better word) to be case senitive in useage. This is due to the fact that NTFS was seen by MS as a POSIX (yes IEEE POSIX 1 ) complent file system. NT/2K/XP does not fully use this complience. To Quote MS:

POSIX Compliance
If you want POSIX compliance, you must use NTFS. POSIX compliance permits UNIX programs to be ported to Windows 2000. Windows 2000 is fully compliant with the Institute of Electrical and Electronic Engineers (IEEE) standard 1003.1, which is a standard for file naming and identification.

The following POSIX-compliant features are included in NTFS:

• Case-sensitive naming. For example, POSIX would interpret README.TXT, Readme.txt, and readme.txt as different files.

• Hard links. A file can be given more than one name. This allows two different file names, which can be located in different folders, to point to the same data.

• Additional time stamps. These show when the file was last accessed or modified.

These are microsoft's claims found here at MS. Unless told other wise the OS will act on information in the NTFS file system as case insenitive but it will display file information in a case senitive way and can be forced to work in a case sensitive manner.