When formatting an external drive which will be shared by a number of users, it is worth considering whether to use UFS formatting or not. The usual recommendation is to use HFS+, but this has a serious disadvantage for shared drives as the drive is mounted as if the current user owns all the files.
As an example, consider a user named Fred, who creates a important file on the HFS+ drive and carefully uses Get Info (or chmod if he's a geek) to make the file only accessible to himself. Fred logs out. Along comes Sally, who logs in and has a look at the drive. She does a Get Info on the file Fred made, and finds it is owned by herself. So she proceeds to delete it, as she can't remember creating it. Result: misery. Another formatting choice is to use FAT32, which also allows the drive to be used on an MS Windows PC. However, the same permissions problems occur.
The solution is to use UFS, the Unix File System, which is the native UNIX disk format. This preserves the permissions as created, and Sally can't look at Fred's files (and vice versa); just like on the startup disk. There is one disadvantage in using UFS that I've stumbled across: it doesn't handle files over 4GB.
[robg adds: A bigger issue is that UFS won't handle resource forks -- and although resource forks aren't nearly as important now as they have been in the past, it may still be a big issue for some users.
As a workaround, though not perfect, Fred could use encrypted disk images and carefully named files, such as Fred's Important Paper -- assuming that Sally isn't malicious by nature, then this should work fine. Any other suggestions for file security on shared hard drives?]
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http://hints.macworld.com/article.php?story=20070830023150249