text not formatting in pages

does the theme have a page.php, and what is the full code of it?

Yes I’m looking at page.php

<?php
/**
 * The template for displaying all pages.
 *
 * This is the template that displays all pages by default.
 * Please note that this is the wordpress construct of pages
 * and that other 'pages' on your wordpress site will use a
 * different template.
 *
 * @package WordPress
 * @subpackage Starkers
 * @since Starkers 3.0
 */

get_header(); ?>
<div id="section1_wrapper">
	<div id="section1">
	<?php if ( have_posts() ) while ( have_posts() ) : the_post(); ?>
                                  <h1> <?php the_title(); ?> </h1>

						<?php the_content(); ?>                       

<?php endwhile; ?>

	</div>
</div>

<?php get_footer(); ?>

the_content() should replicate whatever the user inputs into the page editor; unless the theme or any plugin uses any filter which act on ‘the_content’;

what is the content of that page when viewed in the page editor set to the ‘text’ mode?

what happens if you type text into the editor?

what happens to the content’s formatting if you switch temporarily to the default Twenty Twelve?

or when you deactivate all plugins?

There’s a Disable WPAUTOP plugin that I deactivated.
Thanks Alchymyth!