Let's go back to a plain old screen.
<BODY> Something really cool </BODY>
|  Something really cool | 
We can make things bold.
<BODY> Something really <B>cool</B> </BODY>
|  Something really cool | 
What we are (more or less) telling the browser is: at the <B> start making things bold, and at the </B> stop making things bold.
The same principle applies to italics...
<BODY> Something <I>really</I> <B>cool</B> </BODY>
|  Something really cool | 
...and underlining.
<BODY> <U>Something</U> <I>really</I> <B>cool</B> </BODY>
|  Something really cool | 
Back again to a plain screen.
<BODY> Something really cool </BODY>
|  Something really cool | 
We can use tags in combination if we want to.
<BODY> Something really <I><B>cool</B></I> </BODY>
|  Something really cool | 
This is an example of nested tags. If you are going to use tag pairs in combination (which you will probably be doing quite a bit), then to avoid confusing the browser, they should be nested, not overlapping. Let me illustrate...
   <THIS><THAT>cool</THIS></THAT>    Overlapping tags.... bad
   <THIS><THAT>cool</THAT></THIS>    Nested tags.... good
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