The symbol can be used as an indent for separate paragraphs, or to designate a new paragraph in one long piece of copy, as Eric Gill did in his 1930s book, An Essay On Typography.
The pilcrow was used in medieval times to mark a new train of thought, before the convention of using paragraphs was commonplace.
The pilcrow is commonly drawn like a backwards letter P with an extra full-height stem (¶), but may also be drawn with the round area stretching further downwards, more like a backwards D.
Etymology: Perhaps originated in the perversion of the word 'paragraph' through 'parcrafte', but this is not sure.
Additional Etymology: (q.v. http://www.typophile.com/forums/messages/29/1486.html )