Formatted text is any text that contains special formatting such as font size, font color, bold, italic, etc. When copying text, formatted text is any text that keeps its settings from where it is copied. For example, if you copied text that was bold and then pasted it into a program supporting bold text, the text would remain bold. However, if you pasted the text into a program that did not support bold text, the formatting would be removed.
Unformatted text is any text that, when copied from the source, may lose its formatting when pasted into another program. It may be pasted as plain text because the source program stripped it of its formatting, or because the target program does not support the original formatting.