Yes, it only shows up in the finished Mobi book. I generally use 1em for each "level" of indentation. That looks right to me, although others may of course feel otherwise.
I'm not using negative (hanging) indents, but positive ones. Eg, picking a little verse at random:
Code:
Mary had a little lamb
its fleece was white as snow.
And everywhere that Mary went
the lamb was sure to go.
Then I'd do that in a Mobi book like this:
Code:
<div>Mary had a little lamb,</div>
<div width="1em">its fleece was white as snow.</div>
<div>And everywhere that Mary went,</div>
<div width="1em">the lamb was sure to go.,</div>
and that will indent the 2nd and 4th lines by an amount which looks good to me. In a web browser, however, you won't see the indents.