Much like character formats, InDesign's paragraph formats let you control the appearance of selected paragraphs. For example, you can control a paragraph's alignment and specify left, right, and/or first-line indents, and you can drop caps to and space between paragraphs. If you want to hyphenate a paragraph, you can add hyphenation points manually to individual words, or you can have InDesign automatically hyphenate words as appropriate.
If you choose to use InDesign's justification controls to specify how space is added or removed between characters and/or words to achieve justification, you also have two options for composing text (controlling the spacing approach): the multiline composition method that looks at several lines of text at once, and the single-line method that looks at each line in isolation.