How does the formatter identify chapters?

The formatter looks for your Heading styles — most reliably Heading 1 applied to each chapter title in Word. Every heading it finds becomes a chapter: it starts a fresh page, sets the title in the chosen chapter style, and (optionally) begins on a right-hand page.

This is why the single most useful prep step is applying a real Heading style to your chapter titles, rather than just making the text big and bold by hand — visually bold text with no heading style is invisible to the formatter.

If chapters come out wrong — merged, missing, or split in odd places — you can fix it: see What should I do if chapters are detected incorrectly?