A cell's number format changes only how the value is displayed. It doesn't change the value that is stored and used in calculations. Once that sinks in, it prevents a whole family of errors. It's also the fact beginners most reliably get wrong.
Why the display and the value disagree, and how to fix it
Type 1234.567 into a cell, then format it to show two decimal places (Home ▸ Number, or Ctrl+1 for the full Format Cells dialog ▸ Number ▸ 2 decimals). The screen now reads 1234.57, but the cell still stores 1234.567. The format is a mask painted over the true value. You can prove it. Type =A1*2 in the next cell. You might expect 2469.14, which is 1234.57 × 2. Excel returns 2469.134, displayed as 2469.13 at two decimals, because it multiplied the stored value: 1234.567 × 2 = 2469.134. It never used the shown 1234.57. The one-cent gap between 2469.13 and 2469.14 is the mask and the value disagreeing. In a large model those pennies compound into totals that "don't foot" and reviewers who lose trust.
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The same trap has a famous form. Put 1.4 in two cells and format both to zero decimal places. Each shows 1. Sum them with =A1+A2 and the result, 1.4 + 1.4 = 2.8, displays at zero decimals as 3. The user sees "1 + 1 = 3" and thinks Excel is broken. Excel did nothing wrong. The display rounded each input to 1 while the arithmetic used 1.4.
Nothing here is a bug. What you see isn't what you compute.
So how do you change a value? You round it for real, with a function that writes a new stored number. =ROUND(A1, 2) stores 1234.57, a different number, and now ×2 gives 2469.14. ROUND(number, digits) rounds to the given number of decimal places, and negative digits round to tens or hundreds: ROUND(1234.567, -2) = 1200. Formatting is cosmetic and ROUND is surgical. Use formatting to make a report readable. Use ROUND when the stored precision itself must change, for instance when fractions of a cent must never survive into a downstream calculation.
Which number formats and shortcuts should you know?
The Home ▸ Number group holds the common formats: General, Number with thousands separator, Currency, Accounting, Percentage, Date, Short/Long. Learn the keyboard equivalents too. Ctrl+Shift+~ sets General, Ctrl+Shift+$ Currency, Ctrl+Shift+% Percentage, Ctrl+Shift+# Date, and Ctrl+Shift+! Number with a thousands separator. Ctrl+1 opens the full Format Cells dialog for custom formats.
Percentages catch people first. A percentage format multiplies the display by 100 and adds a %, so a cell showing 20% stores 0.2. =A1/2 on it gives 0.1, shown as 10%, which trips up beginners who think the stored value is 20.
Dates catch them next, because a date is a stored number too. Excel counts days from 1 January 1900, which is serial 1, so 20-Jul-2026 is stored as the integer 46223. Format that cell as Number and the date turns into a plain count. Format a plain count as Date and it blooms into a date. Because dates are numbers wearing a costume, you can subtract two dates to get the days between them.