So how did it come to be that paragraphs in books begin on a new line with an indent at the beginning? This practice in typesetting is so ubiquitous that it seems unlikely to ever have been any other way. There is however a gradual development in custom and style that lead to this standard.
 In the Middle Ages a scribe penning a manuscript would separate coherent groups of sentences with a paragraph mark (¶) or pilcrow, usually in a different color, often red:

Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. ¶ Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. ¶ Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum.

 This is called rubrication and was often performed by a person who specialized in the task and not the scribe himself. As printing with moveable type became established the practice continued with the text of the manuscript or book page being set in type with spaces left in place for the insertion of the paragraph marks by hand. Eventually the innovation of starting the new paragraph on its own line became the norm, though the inclusion of the pilcrow continued.

Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
¶ Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur.
¶ Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum.

 Finally, someone looking at a printed text before the rubrication had been added decided that the leading indentation was sufficient in itself to indicate that a new paragraph was beginning. Also it would be inescapable to conclude that the elimination of this labor intensive production step would yield a significant cost savings to a printing run.
 According to Jan Tschichold in his book The Form of the Book, no innovation in typesetting or page design since has matched the clarity and simplicity of this method of paragraph demarcation.