CD and DVD File Systems Explained!

ISO9660
The original one that's been around for years and has quite limited functionality.
For Example:
You're limited to 8.3 characters for a file name (i.e. SOMEDOCU.TXT)
You're limited to all uppercase file names.
You're limited to file less than 4GB in size.

Joliet
An extension of ISO9660 and allows for longer / mixed case file names. The file size limit still applies. For Joliet to be used, ISO9660 must also be present - this is reflected in the options available.

UDF
UDF is a file system in it's own right and does not depend on another one also being present.
UDF supports long / mixed case file names and does NOT have the 4GB file size limit of Joliet and ISO9660.
It is the 'better' option for those people using up-to-date operating system. I say 'up-to-date' because older ones like Windows 95 and 98 cannot read / understand the UDF file system and will probably report the disc as being corrupt if that's the only one on it.

Standalone DVD players are only supposed to (made to) understand UDF. Being able to read ISO9660 / Joliet is optional. As such, if you're building a DVD Video disc, you at least want to make sure the UDF filesystem is present in any image you're building / burning.
A typical DVD Video disc you buy from a shop will use 'ISO9660 + UDF', so to be totally correct, that's what you should use too. That way, a standalone player can read it (due to UDF) and PC's with old operating systems can read it (due to ISO9660). A new operating system can read both but will favour UDF because it's more advanced.

More Info Here