[vram22]

>Pagers like "more" & "less" have in-built behaviour that knows how to interpret these sequences and render bold or underline appropriately,

Right

>and if you "cat" the file your terminal would probably ignore them

I think the terminal does not ignore them. My guess is that it interprets the characters, but it has no noticeable visual effect on the screen. E.g. if the letter "c" in "cat" is output as "c^hc" (to make in bold in print), the terminal will just print "c", a backspace, then "c" again, which to the user will look the same as a single "c".