Paragraph styles are the most used styles in a word processing program, but you need to understand that the word paragraph in this context means something a little different than what you may be used to. Essentially, all of your headings, footers and headers, and a lot more are considered paragraphs. Even lists, though they have their own styles, can also be considered paragraphs for the purpose of assigning a style.
A good way to get handle on this is to see how the program itself decides something is a paragraph. The fastest way I know of to get up to speed on this is by turning on the paragraph mark. This is a non-printing character that is usually not displayed because most people find non-printing characters confusing. But the true senseiunderstands that they are powerful. The paragraph mark simply shows that something is a paragraph in the eyes of the program. To turn them on in a document, just look for the button like this: 
What you will learn from this is that essentially every time you hit the Enter key a paragraph mark is inserted that says “I have just finished creating a paragraph-level object.” And every paragraph-level object can have a visual style associated with it. Many of the ones we will want use, such as headers, have already been created. But we can create our own as well. One that I always create on a new installation is a paragraph style. That may sound confusing, but here I am using the word paragraph as we normally use it:
A distinct section of a piece of writing, usually dealing with a single theme and indicated by a new line, indentation, or numbering.
Note: This is where you should first open your default template for editing.
To create my paragraph style, I just right click on the style list and press New to bring up the configuration window:
Configuring your Style
The first tab is marked Organizer, and has a few things we should look at. The name of the Style I am calling Paragraph, which is fine, but I would make doubly-certain that the Auto Update box is not checked. There is probably a use for it, but it usually drives people to distraction. It would note that you applied italics to one paragraph, for instance, and decide that meant that all paragraphs in the document should be changed to italic. I have yet to meet the person who thinks this is a good idea. But Next Style is a good one. Writer will look at what you have here, and take it as the style for the next element whenever you press the Enter key. so if you have it set to be Paragraph, that means that when you press the enter key it will automatically set you up for another paragraph with all of your same formatting options. This is great for paragraphs, but for headers you probably don’t want to this the same way. For Linked With, I always set this to None. The reason has to do with inheritance of the object properties. If I leave my Paragraph style linked to Default, and for some reason I later make a change to the Default style, that change can carry over to my Paragraph style. I find it much safer to break the linkage in this case. Finally, this style will be placed in group called Custom Styles, which is fine.
On the Indents and Spacing tab I like to set the indent for the first line of my paragraph at .5″ (equal to 1.27cm). Then I add a space after each paragraph because I like it that way. I find that .18″ is about equivalent to an added blank line on 12pt. fonts (the rule is that 72 points = 1 inch). I leave the line spacing at single, but you could make it double, 1.5 or several others if you wished.
On the Alignment tab I leave my test set to Left aligned for my paragraphs, though you could use Right, Center, or Justified. But Left is the standard for most text.
On the Text Flow tab there are a number of useful things. You can have Writer do Hyphenation of words at the end of a line automatically, though I generally do not do this. The Breaks part can be very useful in a long document with sections. You can set this so that every time you select Header 2 (this usually denotes a major section of a document) it will always start on a new page. But for paragraphs that is not needed. The last section has some very useful stuff. You can set a style that does not split a paragraph-level element between pages. I wouldn’t do it for actual paragraphs, but for headers you can see how useful this is. The same is true for Keep with next paragraph. This is not useful for most actual paragraphs, but very useful for headers. You would not want a header to wind up on the bottom of a page and all the material it relates to on the next page.
Widow and Orphan control is definitely useful for paragraphs, though. Orphans are paragraphs with just a line or two at the bottom of a page and the rest of the paragraph on the next page, and Widows are just the opposite, one or two lines at the top of a page with the rest of the paragraph on the previous page. You can prevent that happening by putting check marks in the appropriate boxes. You can then select how many lines will be moved to prevent this. The program does this by cheating a little on the spacing and margins to get everything to fit on one page. It can cause odd behavior when you are typing, though, because the program does not know ahead of time how much text you are going to type. So if you are typing away and hit the bottom of the page your text continues to show on the bottom of the page until you cross the limit (e.g. 2 lines of additional text if that is what you selected here) when suddenly that bit of text jumps to the next page.
The Font tab, as you might expect, sets the font you will use for this style. For a paragraph I generally use Times New Roman 12pt., but then I am not very adventurous about fonts. Times New Roman is the most widely available serif font on most computers and is a good, serviceable font. And the Font Effects tab is probably not any place you need to go for a plain paragraph, but could have some special uses. Liberation Serif is also an excellent choice that is similar. In general, if you want to print out documents a serif font is better, while for reading on a screen a sans serif font is preferred.
Position lets yo raise or lower the text relative to the baseline, or rotate it, but again this is a special use case.
Outline and Numbering, Tabs, and Borders are not applicable most actual paragraphs. And Drop Caps are kind of specialized. Finally, Background lets you put colored background behind your text. Again, a specialized use.
The Payoff
So, click OK and you now have created your first style. What does this get you? Quite a lot, actually. Take a look at the flow of your work to see how this helps you.
You are writing a document. You click on Paragraph style. Writer automatically goes to the font you have selected, it automatically indents the first line by .5″. The Alignment is set for Left, Justified, or whatever you selected. You go along writing your paragraph, and when you have finished you press the Enter key. Writer automatically inserts a blank line (if you selected that) and starts another paragraph with the same settings. when you get to the end of the page, Writer automatically prevents Widows and Orphans from occurring. All of this happens without you needing to think about it or do anything other than choose the paragraph style at the beginning. Furthermore, with this style in your toolbox you have it available for all future documents. That adds up to a lot of saved effort.
Note: Save your default template at this point to save your new Paragraph style.
A Note About Style Guides
Many professional writers, students, and academics encounter what are called Style Guides. These lay out the characteristics that are required to submit your document and get a favorable reception. For example, publishers may refuse to look at an article if it is not in the mandatory format. And I recall that when I was in graduate school they could refuse to accept your doctoral dissertation if you got the margins or line spacing wrong. If you ever encounter anything like, you can just set up the styles you need to reflect what they are looking for and save yourself a lot of grief. Just create a Template for this particular group of styles and save it. there is a tutorial on creating templates here.
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