Wow, lot of comments, as expected on such topic (that, and placement of braces...).
About the third option: there was (I hope the past is right here!) a choice of using tabs to indent by multiples of 8 positions, then use 4 spaces to fine adjust at the end. The worst of two world, IMHO.
There is also people forgetting to adjust properly their settings, so you end up with lines indented with spaces and others with tabs.
Personally I use tabs in my personal projects, and whatever the current convention is on the projects I work on.
I prefer tabs because they are compact, flexible (as LKM above points out), because I use mostly editors allowing me to adjust the width of tab (so that's a non-issue), because some dumb editors force me to hit backspace or left arrow n times to un-indent or go back of one level. Of course, my editor is smart enough to do what I tell it, to insert (or remove) tabs (of right size) or correct amount of spaces when I indent or un-indent.
I admit when I paste code in a Web page, I replace my tabs with two spaces (small amount to avoid horizontal scrolling, awful in a Web page, particularly with lot of lines) but it is quick and painless, without risk of mistake, the reverse is harder! And output on terminal is terrible too.
About savage code formatting: I admit I guilty. But that's always to make code conforming to in-house rules, to fix above mentioned mix of tabs and spaces (or bad indenting because of dumb auto-merge), follow our rules of naming (or fix typos / bad English sometime), etc.
As you point out, when a portion of code is unexpectedly formatted, it is a distraction: we see more the clunky formatting than the intended logic!