Wayne Sheffield continues his SQL Server Management Studio Tips & Tricks series:
Regardless of whether you like to use tabs or spaces, this is where you go to configure your settings. The first part of the screen controls the indenting options. If “None” is selected, then the next line will start at the beginning of the line. If you have selected “Block”, then it will align the next line with the previous line. And if you are using “Smart”, then the appropriate language will determine which indenting style to use.
The next section controls the tab size / indent size. This controls how many characters that a tab takes. It also controls whether tabs are converted to spaces or kept as tabs.
You can read more about these options at this link: Manage Code Formatting.
I turn on the View Whitespace option that Wayne mentions because I’m a formatting pedant that way.