As I understand 'letter-spacing', the term refers to deliberately and visibly increasing the space between certain kinds of letters e.g. small-caps or all-caps.
microtype does support letter-spacing in this sense, as do various other packages.
However, this has nothing whatsoever to do with line-breaking.
microtype can do, if certain engines are used, is make adjustments to assist the line-breaking algorithm and improve optical alignment etc. This is a very different feature and, by design, should not be noticeable or visible to the reader. That is, of course, it is visible in one sense, but it should not be perceived unless the reader is looking for it and examining the properties of the typesetting, as opposed to examining the content of what is typeset.
Whether any particular document uses micro-typography and, if so, which features it uses with which settings depends on a range of factors.
Format used. This is pretty much limited to LaTeX, as far as I know.
microtype package loaded? This is required for micro-typography (though not for letter-spacing necessarily).
Which engine is used and which version of that engine? Current pdfTeX is fully supported. Current LuaTeX is well supported. Current XeTeX has extremely limited support. TeX has none.
Which fonts are used? Some features require scalable fonts.
Which fonts are used? There are font-specific configurations for some fonts. Otherwise,
microtype will use more conservative 'generic' settings. Of course, people can override these.
Which features are activated for which fonts? There are the defaults, but these can obviously be overridden.
Does the document class and/or do loaded packages interfere with the implementation of features in specific contexts? For example, optical alignment fails, by default, with most (all?) classes for section headings. (Moreover, I can't get it to work for some classes and packages, even though it can be fixed for the standard classes and Memoir, for instance.)
If the configuration ticks all the needed boxes,
microtype can use font expansion to assist line-breaking. Basically, it scales the font by a very small factor to help avoid bad horizontal spacing. The effect of this is not a noticeable change in the size of the font, but an extremely subtle one which really just helps with line-breaking.
In addition, if the necessary boxes are ticked, the package can also do such things as enable hanging punctuation and other aspects of optical alignment. This feature works best with a font-specific configuration, but it works reasonably well with the generic settings for most other fonts.
The full list of available micro-typographic features (from table 1 in the manual) is:
- Expansion (auto or non-auto)
Both features are supported for LuaTeX and pdfTeX. Only protrusion is supported for XeTeX.
Only supported for pdfTeX and disabled by default.
Here are two before-and-after shots for illustrative purposes. The lines indicate the page layout, so you can see the edge of the text block easily.
This shows the result without
microtype. Things are aligned actually, but not optically.
This shows the result with
microtype. Things are aligned optically, because the punctuation is permitted to slightly protrude into the margin.
This shows one spot where TeX is having trouble breaking a paragraph into lines. The result is one of several 'bad boxes' in this document. (Note that I had to increase the font size to 12pt and reduce the paper size to A6 to get bad boxes.)
This shows the improvement with
microtype's expansion feature. Loading the package eliminated all bad boxes in this document.
Related non-micro-typographic features (from the same table):
This is what people generally call 'letter-spacing' on this site. It is supported for pdfTeX and LuaTeX. Although not supported for XeTeX, the
fontspec package provides this function as
LetterSpace for this engine.
Here's a comparison of standard small-caps:
and the same example with
tracking enabled, which applies to small-caps by default:
microtype provides some capacity for disabling ligatures selectively etc.
Code for expansion demo:
All examples were compiled with pdfTeX.