Built-in styles are combinations of formatting characteristics that you can apply to text to quickly change its appearance. For example, applying the Heading 1 style might make text bold, Arial, and 16 point, and applying the Heading 2 style makes text bold, italic, Arial, and 14 point. (Those are examples; exact formatting characteristics depend on Word's default settings and those you might have chosen for yourself.)
When you enter your first top-level outline entry, Word automatically formats it with a built-in style, Heading 1. As you continue to build your outline by adding subordinate and body levels, Word in turn continues to apply the appropriate built-in style to each heading and body text entry. In this way, your outline levels (Level 1, Level 2, Body Text, and so on) are directly tied to built-in heading styles (Heading 1, Heading 2, Normal, and so on).
While you can manually change the formatting of text in your outline, veering away from the built-in styles that Word offers can result in some outline entries not being displayed correctly. So if you want to change formatting across your document, you might want to do so in another view, such as print layout view, once your outline is complete.
On the opposite end of the spectrum, if you find extra formatting distracting, you can display your entire outline as plain text by clicking Show Formatting on the Outlining toolbar.