Stream is a representation of bytes. Both these classes derive from the Stream class which is abstract by definition.
As the name suggests, a FileStream reads and writes to a file whereas a MemoryStream reads and writes to the memory. So it relates to where the stream is stored.
Now it depends how you plan to use both of these. For eg: Let us assume you want to read binary data from the database, you would go in for a MemoryStream. However if you want to read a file on your system, you would go in for a FileStream.
One quick advantage of a MemoryStream is that there is not need to create temporary buffers and files in an application.