There are a couple of options available to you.
1) FAT32. This is the easiest option since you can read and write to the drive from both Windows and Macs. Only problem is that you're limited to file sizes under 4GB, so if you plan on putting really big files on the external drive, this is not the option for you.
2) NTFS. Another good option but with a limitation. Windows can read and write to it, Macs can only read from NTFS. Snow Leopard has included NTFS write support but it has to be enabled. Another option would be to install a program like MacFUSE to give your Mac NTFS writing ability. It's a free application and works pretty well, and since NTFS doesn't have that 4GB file limitation, it's a really good option, especially if you plan on attaching the external drive to various computers.
3) Mac OS Extended (Journaled). This is the least desirable file system if you're sharing the drive between Mac and Windows. Windows can't even recognize Mac OS Extended drives, so you will need software like MacDrive to give Windows the ability to read and write to the drive. The only reason I see for using this option is if the external drive is going to be hooked up to the Mac 99% of the time and/or if you plan on using Time Machine as a backup method.