A word on manuscript format
Everyone has their preferences on how they like to write all of their drafts. Some like to use fancy word processors like Microsoft Word so they can use it for planning and outlining as well as writing; I personally like Scrivener for Mac OSX because of the extra features. Some prefer simpler programs like Wordpad or Textedit, just so they can get the story down. Still others use typewriters or simply a pen and a pad of paper. Whatever your format is, after you've done all of your editing, your next step may be to send your work to an agent or publisher, and the most accepted format is "manuscript format."
The big question is why would you send it in like this. Many people who write have a particular view on how the text should be read. This is all well and good when your novel is being printed, but it won't help sell the novel first. It can be viewed as "gimmicky," like using a colored paper or leaving post-it notes for the reader, but ultimately it is viewed as unprofessional, and that will be the end of it. The best way to avoid that is to stick with the format. When in doubt, ask for a preference; your agent/publisher will be grateful later at about page 142.
There are many different variations of manuscript format, but they all follow a set of guidelines. The Wikipedia page for manuscript format has these guidelines listed, as well as some main reasons why these are used. I'm currently printing out my first draft in this format, and I quickly saw why this is accepted. I'll do my best to explain each of them from what I have discovered in my research as to the history or the practicality of this format.
( And they are... )I hope that clears some things up. This was just as much for my benefit as it was for you. Nothing, of course, is set in stone, so if there needs to be a correction, please feel free to point it out. All writing, and life in general, is always a WIP, or Work In Progress.