Smashword's Meatgrinder program is very particular about how works are formatted. Formatting is, as merrihiatt pointed out above, the encoding with a work that determines how it looks, primarily on the printed page.
Some of the major problems I've had with Meatgrinder is that it's very sensitive to line spacing within paragraphs. If you right-click on a paragraph you'll get a pop-up menu with various options. Make sure your line spacing is set to 0" everywhere.
Another thing, and I don't mean to be offensive here, but you need to buy a book on whatever program you're using and read and study it extensively. In addition, buy a "style guide", preferably Strunk & White's and consult it religiously. Why? Because you need to know more about what you're doing or trying to do. As a writer, part of your job is to format documents according to an editor's requirements which means you need to know the program you're using backwards and forwards.
Sorry, not trying to be an a$$ here, but before you try self-publishing you need to do a lot more work preparing.