Yes. Yahoo! Mail "gets" HTML! If you receive a message that includes it, Yahoo! Mail automatically translates the HTML into styles, sizes, fonts, colors, etc. Yahoo! Mail also automatically converts email addresses and URLs into hotlinks in messages you receive, so you can click them to open the address in a new browser window.

If you receive a message in which the HTML tags are visible, it's likely that the message's sender didn't properly indicate that the message should be treated as HTML.