When you use something like Win32DiskImager to prepare an SD card, all you are doing is taking the image file of the distribution you want to use and applying that image to your SD card.
If you have used DD, this is basically the same process.
The Image files of all of the RPi distros contain a FAT16 partition and an EXT3 partition (versions of FAT and EXT might vary from distro to distro). You are just laying down the image onto the new disk, making it an exact copy of the developer's disk. On first boot you should have an option to resize the EXT3 partition to fill whatever space your SD card has left.
The NOOBS instructions are just formatting the whole card to FAT16, and copying a FAT16 based distro onto it. (rather than splitting the SD card into a FAT16 '/boot' partition and an EXT3 Linux '/' partition.
The advantage of using the SD card formatter over Windows' built-in formatting is that the only option is to format it as FAT and it will only let you format an SD card so there are fewer ways for a N00b to go wrong with the NOOBS instructions. If you are using a brand new SD card you shouldn't have to use the Format step at all, it should be ready to roll. Just copy the NOOBS files onto it.