Basic Book Design/Indentation

Don't indent the first paragraph of a chapter or section. Only following paragraphs are indented.

LaTeX automatically does this. Microsoft Word doesn’t.
If you use Microsoft Word, you'll have to create a new style for "First Paragraph" and manually set all these first paragraphs into that style.

How Much To Indent?

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If you choose to indent paragraphs (as opposed to setting them with a small space between each), set your indentation in as far as the font is high. E.g., if you’re using a 12-pt font, indent your paragraphs about 12 points, or 0.17 inches. Visually, 12-pt Helvetica is quite different than 12-pt Times New Roman, so you might want to make adjustments based on the visual appearance.

Indent no more than the leading (space between lines within a paragraph). E.g., with 15-pts leading, indent no more than 15-pts indentation, or 0.21 inches.

Microsoft Word's default indentation is set to 0.5 inches. This comes from the days of creating a manuscript on a monospaced typewriter (five spaces was about one-half inch) and from the half-inch automatic tab stops made popular by the first word processing software.

Spacing between paragraphs is a related consideration. If you choose the more modern digital design of having space denote a paragraph break, then paragraph indentation is overkill—unless you want it for design aesthetics. Indentation exists because it was cheaper for early printers to do that than to add strips of lead between paragraphs, thus increasing the total number of pages required per book and increasing costs per unit. As a design element, indentation raises questions, such as the questionable need for indentation of running dialogue.

As e-reader devices overtake paper book sales, book design aesthetics will evolve as well. There is little reason to maintain the printer’s status quo when there is no longer a printer involved. As with all good design, use common sense, have a reason for your choices, keep things consistent, and don't be afraid to break a few so-called rules.