The quickest way is to click the Home tab, click Multilevel List, and then
choose the "1 Heading 1 1.1 Heading 2 1.1.1 Heading 3" built-in list
format.
If you later want to edit a multilevel list, as well as most lists created
in older versions of Word, place the insertion point in the first top-level
paragraph (in the first Heading 1 paragraph if heading numbering is being
used), and then click Home tab | Multilevel List | Define New Multilevel
List. You are presented with a dialog box similar to the Customize Outline
Numbered List dialog of Word 97-2003 (see
http://www.shaunakelly.com/word/numbering/OutlineNumbering.html).
The other approach is to use a list style: Click Home tab | Multilevel List
| Define New List Style. Type a name for the list style in the Modify Style
dialog box. Click Format, and then click Numbering to define all aspects of
numbering, including associating each numbering level with a paragraph style
(again, see
http://www.shaunakelly.com/word/numbering/OutlineNumbering.html
for assistance).
Once a list style has been created in a document, it will appear at Home tab
| Multilevel List (under the "List Styles" heading). You can click it to
apply it to text, but for numbering associated with paragraph styles it will
be more convenient to apply the appropriate paragraph style to text.
However, the advantage of list styles is that you can easily modify an
existing list style by right-clicking its icon and then choosing Modify from
the context menu. This takes you into the Modify Style dialog box for the
list style.