Multiple types of files are accepted for stories submitted as attachments in the submission wizard:
Plain Text Files: files ending with .txt or .asc. Those are plain text with no formatting.
HTML Files: files ending with .htm or .html. Those are basically web pages. They can be created with most word processors. Use them only if your story's text needs and contains bold or italic text.
.docx files are accepted. Bold and italic text are properly handled.
.odt files are accepted. Bold and italic text are properly handled.
Markdown files are accepted.
Alternatively, the site's submission wizard gives you the option to paste your story's text directly into the form instead of attaching a file. Use that option if your story's text is fairly short (under 10,000 words) and if you don't need formatting.
The site's Text Formatting Guide provides more in-depth information about your options.