Live File System is the term Microsoft uses to describe the packet writing method of creating discs in Windows Vista and later, which allows files to be added incrementally to the media. These discs use the UDF file system.
The Live File System option is used by default by AutoPlay when formatting/erasing a CD/DVD -R or -RW.
Compatibility
Older Windows versions do not have support reading the latest UDF versions. If users create DVD/CDs in Windows Vista using UDF 2.50, these may not be readable on other systems, including Windows XP and older (pre-Mac OS 10.5) Apple systems unless a third-party UDF reader driver is installed. To ensure compatibility of disks created on Windows Vista, UDF 2.01 or lower should be selected.
References
Live File System Wikipedia(Text) CC BY-SA