To get HTML email to work, in addition to formatting the message body using HTML, the mail headers need to be correct and the receiving email client software needs to support HTML emails (some don't) and have the HTML support enabled (some people prefer to get plain text emails only and turn this off.)
If you don't mind using a PHP mailer class, the easiest way to accomplish this is to use something like the phpmailer class -
http://phpmailer.sourceforge.net/ This also includes a way to send a plain text version to those who cannot view an HTML email or don't want an HTML email.