Subdivision formatting for manuscript format and publication format differ with slight variations, but there are some standards. In many cases, a writer's subdivisions generally stand if they're meaningful and timely.For example, titled chapter or subchapter headings, like The First Refusal, Enter the Villain, The Second Refusal, and so on, as chapter or subchapter divisions.
In general, chapter subvisions should start on new pages. In manuscript format, a first page typically has a page sink of half a page, title page with only novel title and byline, as it will also be in paper publication formats. Same with chapter openings, a half page page sink, title, one blank line, begin body text. Generally, subchapter divisions are run in with a blank line before and after a subchapter heading title. The page sink is also the real estate for chapter openings reserved for illustrations.
Like with a title page, chapter and subchapter heading titles should be center justified in Standard Manuscript Format.
Variations for digital submissions are not yet as standardized as paper submission guidelines, but generally omit page sinks when intended for digital publications where they're read on screen and not printed out on paper for screening. See individual publisher submission guidelines for guidance on a house's preferences. However, as most novel publishers still insist upon paper manuscripts for unsolicited submissions, that's not yet a critical consideration.
Otherwise, the hash mark, #, on an empty line indicates an untitled subdivsion. The purpose of the hash mark is to inform editors and typesetters that the line is intentionally left empty. An editor would then determine if the hash mark means there's a meaningful enough reason for a subdivision and might negotiate with a writer over whether to let one stand, omit, or include one when one is absent but indicated. They will be omitted for publication layout, ideally anymore, by a writer when the house calls for a digital submission for ease of publication purposes.
Chapter and subchapter heading titles serve a similar purpose as the hash mark, saying, this is an intentional subdivision.
[This message has been edited by extrinsic (edited September 27, 2009).]