It's peculiar. It depends on the medium.
Open your favorite novel and chances are you'll see it's 1.5 or even single-spaced, with no extra lines between paragraphs --except in those places where the author wants you to pause for breath, such as a scene change or a bit that takes place in your mind.
Now try to read that same format on a computer screen and it's unreadable. You need the extra space between paragraphs, with three blank lines where one would work in a book.
Look instead on a typed thesis or manuscript on letter-size paper, and it looks most comfortable double-spaced, with longer breaks between paragraphs.
So it's not a matter only of right or wrong, but also of how you're reading it.
When I publish e-books on bdsmbooks.com, I use novel style. Single-spaced, indents, full-justified, breaks between paragraphs only where there's a pause. This looks great when printed, or when viewed as a PDF. It looks peculiar but okay when read in .rtf format, and pretty good on an e-book reader.
But when I copy the first chapter over for a free preview, I use breaks between paragraphs. This looks better on the computer screen when on a webpage. No idea why, it just does.
I will shortly publish here, as a public service, some editing guidelines.