This gets into file names case. As an example the file MY.TXT, My.TxT, my.TXT, my.txt would be seen as different files and all could live within the same folder if you had selected Case-Sensitive.
If you had set for the default the file MY.TXT, My.TxT, my.TXT, my.txt could not exist in the same folder as the system would treat them all as the same file. If you had tried moving one of these into the folder the OS would ask you if you want to replace the other file.
The short of this is this use the default Mac OS Extended (Journaled) ;-)