Let's take a hard disk of 40Gb.

First of all if you are a normal user (meaning you don't need extreme space for 20 programs on the C: partition or things like that) you should partition your C drive at 10 Gb and with the rest of the space available make a secondary D: partition for data.

The partitions should both be formated as NTFS, because they are more stable and error free.

If you are an extreme programs power user you can increase your c: partition to 20 Gb, although 10 Gb is ideal.
This article was made for WindowsXP, if you are using Windows Vista the settings remain the same except the first partition which should be arround 25 Gb.