They represent somewhat different things.
The InputStream is the ancestor class of all possible streams of bytes, it is not useful by itself but all the subclasses (like the FileInputStream that you are using) are great to deal with binary data.
On the other hand, the InputStreamReader (and its father Reader) are used specifically to deal with characters (so strings) so they handle charset encodings (utf8, iso-8859-1, and so on) gracefully.
The simple answer is: if you need binary data you can use an InputStream (also a specific one like a DataInputStream), if you need to work with text use an InputStreamReader..