To keep track of what's on the drive, a table of contents is needed and that's where FAT comes is. FAT stands for File Allocation Table. When you partition and format the drive, it is being organized into a lot of cubby holes, so to speak. The biggest possible size each cluster can be is 32,768 Bytes. FAT can handle - 2,147,483,648 Bytes.
Bytes is a pretty ugly number, too many digits.
To make it more manageable, you need to understand that computers use binary systems, which means all numbers are based on 2. Here's how you convert Bytes to Kilo Bytes to Mega Bytes etc. You might notice that the new hard drive that you installed, gives you less than the amount of storage space advertised. Well, the marketing department of the vendor doesn't know too much about bits and bytes and binary system. So when they have a drive that can hold 8,400,000,000 Bytes, they just call it 8.4 GB and say that's close enough for government work.