You need to write your actual content in separate plain text files written with Markdown formatting. The Book.txt file is just a list of files. You can see the sample content for each Leanpub book styles by clickling on the following download links for business, fiction and technical books.

I'll try to explain briefly here.

The chapter structure is separate from the files.

# This is an h1, which becomes a chapter

## This is an h2, which becomes a section

### This is an h3, which becomes as subsection

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