It is a big issue. I also don't know what is exactly correct.
Overclockers.com.au says it is a marketing hype. That means 120GB is defined by the manufacturers as 120 Billion Bytes = 120, 000, 000, 000 Bytes = 111.75 Giga Bytes (as we define 1GB = 1024*1024*1024 Bytes). But this doesn't seem correct here, as you have got 114 GB.
Also there is another logic, which is I realise as more correct: as Flanderz said 120GB is the unformatted capacity, and when you format it as NTFS or FAT32 or FAT, some space is allocated. So now you have got only 114GB in NTFS (?). NTFS allocates more space than FAT32. If this logic is right: oneday when you format the HDD as FAT32, you should get more than 114GB then. We will see. To me it wasn't though. I had a 6.4GB HDD to test this out. For both NTFS and FAT32 I came up with 6.00GB in My Computer.
This makes more curious when this happens:
http://www.betaone.net/forums/index....T&f=43&t=18187
I was concluded as this happened because of the File System Allocation (NTFS). But File System cannot be the reason for the both situations. You can see in the pictures, the HDD is already detected as 6.00GB, and that 0.29GB difference is after that. I really don't know.