With more detail and clarity than I can offer you, Paul Drummond has added a page to his own website in which he lays out the process of setting up a manuscript for e-publication to a professional standard.
“Each chapter was copied from the original Word document, converted to HTML and added to the .ePub document. Unnecessary formatting was removed as all styling within an .ePub document is handled by a global style sheet. Generally, eBooks shouldn’t contain much styling / presentation information. For example, the Kindle always uses the same typeface so there’s no point specifying which font to use. Also, the size of the page text can be adjusted by the user so there’s no reason to specify absolute type size such as ’12pt’. After converting all the text from the novel we had a well structured .ePub document, ready for use on various readers and devices, or conversion to .mobi format for the Kindle. However, it still needed a cover.”
Follower is now in the Kindle store – I’ll make a bit more noise about that in a week or so when I should also be announcing a Kindle edition of Out of his Mind, the short story collection that nabbed me the British Fantasy Award, along with a little pre-Christmas freebie.