Advantages of FAT16 include:

MS-DOS, Windows 95, Windows 98, Windows NT, Windows 2000, and some UNIX operating systems can use FAT16.
There are many software tools that can address problems and recover data on FAT16 volumes.
If you have a startup failure, you can start the computer by using an MS-DOS bootable floppy disk to troubleshoot the problem.
FAT16 is efficient, in speed and storage, on volumes smaller than 256 MB.

Disadvantages of FAT16 include:

The root folder can manage a maximum of 512 entries. The use of long file names (LFNs) can significantly reduce the number of available entries.
FAT16 is limited to 65,536 clusters, but because certain clusters are reserved, it has a practical limit of 65,524. The largest FAT16 volume on Windows 2000 is limited to 4 GB and uses a cluster size of 64 KB. To maintain compatibility with MS-DOS, Windows 95, and Windows 98, a volume cannot be larger than 2 GB.

FAT16 is inefficient on larger volume sizes, as the size of the cluster increases. The space allocated for storing a file is based on the size of the cluster allocation granularity, not the file size. For example, a 10-KB file stored on a 1.2-GB volume, which uses a 32-KB cluster, wastes 22 KB of disk space.

The boot sector is not backed up.

There is no built-in file system security or compression scheme with FAT16.