The tricky part is if you weren't working with HTML in the first place. If you're collating posts from a blog or a wiki and assembling them into an e-book, you won't have to put up with quite as much drudgery. But if you're starting with a Microsoft Word (DOC or DOCX) or Open Document Format (OpenDocument or ODF) document, your best bet is to export it directly from the source application into HTML. (Word users should do a "Save as..." using the "Web Page, Filtered (HTML)" option, which strips out most of Word's generated cruft.)
Exporting to HTML from your source program helps preserve the most crucial formatting and typically also preserves sections and chapters: outline headers are turned into h1/h2/h3 tags, which most conversion programs correctly recognize. Some are even able to auto-generate tables of contents from those tags. That said, I've had good results using Word to generate TOCs before I send the document to the e-book program, since Word typically gives you a broader range of formatting options.
Microsoft Word (DOC or DOCX)
If you're dealing with an original manuscript, odds are it's probably going to be in Microsoft Word format. Proprietary as Word may be, almost every device on the face of the Earth can read or write Word documents. And the format has native support for most everything you could think of: formulas, chaptering, footnotes, indexes -- in other words, anything that might show up in an e-book.
That said, Word documents are best seen as a starting point for an intermediate conversion format, most likely HTML, rather than a format that can be converted directly into an e-book. In fact, most e-book conversion programs don't accept Word natively as a source document type. They may accept Word's sibling format, RTF, but that is already at least one stage of conversion away from the original and increases the chance that certain features might not make it through the conversion process. For example, RTF does support features like sections and footnotes, but the Calibre e-book creation suite, for one, didn't process them correctly when I tested it for this article.
OpenDocument, or ODF, is the format used by OpenOffice.org. (Microsoft Word also supports ODF, although it isn't the default format for Word -- it's just one of the formats it reads and writes.) Third-party OpenOffice offers extensions that let you export directly to e-pub formats; there are also a number of standalone applications, such as ODFToEPub, that will do the same. If you're already in the habit of creating your documents in ODF, your path to creating a finished e-book may be slightly shortened because of this.
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