John August said in his IMDB column:

"In talking about presentation, I'm forced to fall back on my ugly person/beautiful person analogy. Sure, a bad script can be perfectly formatted, and a good script can look crappy, just as an ugly person can wear beautiful clothes and a supermodel can wear rags. But would you recognize Cindy Crawford in a potato sack with muddy hair?

If your script looks bad or is difficult to read, no one will bother to try.

Proper formatting is the least important aspect of a screenplay. But it's also the easiest by far. Any moron can format a script. So if your script is badly formatted, you're a sub-moron. A caveman. A troglodyte. Or at the least, a very lazy writer who doesn't take his craft seriously.

In terms of spelling and other mistakes, one or two typos won't kill you. But a typo on every other page will put you right back in sub-moron category. So you owe it to yourself and your readers to have someone proofread what you write."

Harsh but fair.

In this format a screenplay equals a page a minute. Dialogue is about 30 seconds a page and action is about two minutes a page so it balances itself out in a typical script.

Download RTF example

Templates

The font should be in Courier and 12. Courier New isn't an adequate substitute. Courier is a fixed width font so it helps to make the page count a good measure of the screen time - even if there are prettier fonts available. If you haven't got Courier on your system get one from here.
These are links to other formatting guides:

Nicholl Fellowship - Notes on formatting

Crafty Screenwriting

David Trottier - The New Spec Style

Wordplay - Column 23. Points for style.

Hugo Moss - How to format

Creative Screenwriting - The Architecture Of The Contemporary Script Page