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There are two distinct kinds of formatting which can be applied in Word:
Character formatting is a generic term which refers to all kinds of formatting where the smallest component it can be applied to is a single character. A good example of character formatting is Bold, or Italic as these can be applied to individual characters within a word if required.
Paragraph formatting is a generic term which refers to any formatting where the smallest component it can be applied to is a paragraph. An example of paragraph formatting is alignment, as you can only align whole paragraphs, not individual characters within the paragraph.