This is a somewhat thorny issue. In fact, I just posted an issue respecting this the other day, to which no one has responded. Here's a quick overview, with enough to pursue it further on the MVPS website (probably not updated for 2007) or otherwise.

Formatting is not the same as a style, and paragraph styles are different from character styles. When a para style is applied to less than a complete paragraph (including the final pilcrow, or paragraph mark), a new character style is created. If you para style was, say, Body, the new character style would have the name Body char, and the chars would start adding up, along with occasional Body's, as you continued the practice. In Word 2007, the designers created what they call linked styles, which, in a sense, legitimizes this confusion. Some think it's great; I'm in the other camp.

"Keep track of formatting" is an open door to building long lists of similar style names.

Depending on your needs for Word, this may be a problem or not. When a long document gets filled up with such junk styles, as opposed the proper styles, the potential becomes greater for Word to get confused, so to speak, and for styles to start behaving strangely. Don't ask me what's actually going on in the background; I'm not a programmer by a long shot. Just imagine being a school teacher with five Amy's in the class and what could occur.

Part of my job is maintaining clean templates and documents (often long and complex ones), so I deal with these issues all the time. Word is more stable than it used to be, as is Windows 7 over XP, and documents with lots of junk, or superfluous styles that have been imported by authors pasting instead of "pasting special" as unformatted text, may remain stable more than they used to, but it's still tempting fate.