Allocation size is the block size used in the storage device when you format. You can safely accept the default of 4096. If you have a lot of small files it is better to keep it small, so that you don't waste the space. If your file sizes are large, then you might get a performance gain by having the allocation size large, because then the system needs to seek a lesser number of blocks.
The average space wasted per file is half the allocation unit size. Thus 4K wastes 2K and 32K wastes 16K .
But note that modern drives have high capacity and hence there's no need to consider wastage - unless you are using a smaller SSD.
OTOH, say you have a 3K file which needs another size increase of 2K. With 4K allocation size, data needs to be split over two blocks – and also these blocks may not be together - resulting in fragmentation. Naturally with a larger allocation size, fewer blocks to keep track of and less fragmentation.
Hope you understand the differences how the allocation size affects the filesystem.
