A Not to worry -- FAT12 is merely DOS's way of maximising the available space on your no doubt tiny partition. When you create a partition smaller than about 16Mb with fdisk (in any DOS, Windows 95, or NT version) and then format it, you get 12-bit file allocation table entries -- how the file system keeps track of filenames, attributes, and locations -- instead of the normal 16-bit version.
It works just the same as the standard FAT16 file system, and it's readable by DOS, Windows 95, Windows NT, and OS/2. Whether you can install anything on such a small partition in these days of 125Mb office suites (or run it on such an old PC) is a separate issue.
- Lincoln Spector