part of it (the content of the posts etc.) is located in the database you set up with your installation. other parts are from the various php files of your theme and of the wordpress core files.
what you see in the browser is generated dynamically combining these two sources.
unless you are more specific what you want to edit, you could try to edit the content (that what is specific to your posts) in the wordpress dashboard editor (posts or pages); or edit the structural parts by editing the theme php files in ‘appearance’ ‘editor’ (in the dashbord as well).
For example, in my source code (html) under ‘My Favorite Links’, I would like to go in and add a blank line between links or maybe a colored line separating the links. I don’t know where the code is to do that. I see it when I am in my blog and go to View -> Source Code, but don’t know how to get to that code to edit it.
The changes that you’re describing sound better suited to a CSS file. Are you familiar with editing Cascading Style Sheets?
You can find the style sheet being used by your theme if you click on Themes in the Admin panel, and then click on “Editor” under that. A list of all the files in the theme will be displayed on the right, and one of those files will be the style sheet. Use the source code to figure out what page elements to reference, and then either add to an existing style definition, or create your own.
For example, your list of links are most likely coded as an unordered list, so each link is a <li> object. You can set a style that adds padding-top to add extra space, or a top/bottom border to add lines between the links.
