A visitor to this site has asked how the manuscript ought to look, and a young writer dropped in this afternoon with a completely unacceptable manuscript: single-spaced, on both side of the paper. So I guess it's time to talk about format.
While your manuscript may look gorgeous to you, to your editor it's just work. Your taste in fonts, layout and punctuation doesn't mean a thing unless your choices make the editor's job easier.
Ideally, she'd probably prefer triple-spaced text, but not many word processors let you do that. So you'll double-space your ms., with no extra space between paragraphs. Paragraphs themselves will be indented about half an inch from the left-hand margin. Margins on all sides will be about an inch to an inch and a half.
You'll number your pages, usually in the upper right-hand corner, with arabic numerals. You may want to include a header with your name and title, on the very unlikely chance that some pages will go astray. Don't bother...or, at most, put your last name in the upper left-hand corner.
Your paper should be standard 8-1/2 x 11 20-pound white bond, nothing fancy.
You may want a separate title page, but it's not that important. It's a good idea to start each chapter on a new page, so the editor doesn't have to search too hard for it.
The font should be a serif typeface like Times New Roman, 12 or 14 points. Serif text tends to be more readable than sans serif fonts like Arial and Verdana. You won't use bold except perhaps in chapter headings, and you'll use italics sparingly; it's hard to read more than a couple of lines in italics. (Some publishers prefer that you underline text to be set in italics, just like the old typewriter days. If so, do what they ask.)
Many editors prefer not to chase a paragraph between the bottom of one page and the top of the next. You can arrange this by formatting to keep paragraphs together. This may sometimes result in a very deep bottom margin, but if it makes your editor happy, do it.
Don't bother with a right-justified margin. Unless you're using a desktop publishing program, a right-justified margin results in extra-wide spaces between some words. This is annoying and distracting, especially when the spaces create "rivers"—the illusion of long, snaky paths through your text.
Bear in mind that only your editor is likely to see the ms., and once the novel is typeset, the ms. that you suffered over becomes mere "dead matter." Even so, be sure you get it back from the publisher. At some point you'll be able to donate it with the rest of your papers to some university library, and maybe make more in tax deductions from that gift that the novel itself ever earned you.
You can download a manuscript sample here—it's the first two pages of Henderson's Tenants in Word.