I read a lot of fiction, which tends to have a lot of dialogue; each quote tends to be a separate paragraph. All the novels I have downloaded so far do not have spaces between paragraphs, but indents instead, which I think is correct. Some of the books can have 5-10 paragraphs per page (on a 6" screen). Imagine if a blank line was between each paragraph - as there are only 20-25 lines per page, you would waste up to 25-50% of the screen on blank lines, which is just plain daft.
There is at least one reason why people use blank lines on web sites (as indeed do I) - if you try to indent paragraphs using the tab key you not get an indent - the cursor instead jumps to another control. It is easier to tap enter twice than to enter+space+space+space+space to get an indented paragraph.
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