Typically, when you clicked Advanced Edit, Microsoft Word would open as your advanced editor. The type of file you would edit in Word is an .htm file because HTML is the default format for messages. If you changed your message format to be Plain Text, Notepad would open instead and you would edit a .txt file.
You can use all the features you are familiar with in Word to create your fancy signature. It's often helpful to use a table as a structure in which to place the various parts of the signature. This gives you full control over the position and alignment of each part so they don't run into each other.