HFS+ is case-preserving but case-insensitive. This means you can create a file name File1 and it will save the capital F when you view the file again. However, you cannot add another file named file1 to this folder because it makes no distinction between the two names when searching by file name or referencing the file.
UFS, unix-based, is case-preserving and case-sensitive, so you are allowed to have a file called File1 and another named file1 in the same folder. This is generally needed only if you have to develop Unix-based applications.
UFS Volumes are not visible from within Mac OS 9 (classic mode). Furthermore, Airport is not functional if Mac OS X is installed on a UFS volume. Although Mac OS X can be installed on UFS, for these reasons Apple recommends using HFS+ unless you have a reason not to.