The outputFormatted bean accepts a string in its "value" attribute containing a very limited set of HTML markup and outputs formatted results. It is not intended as anything near to a generic HTML output engine, and will never be such a bean. Developers needing full HTML output should use <f:verbatim > or <tr:outputText > with escape="false".
What this bean does provide is a limited ability to use a single source for translated or user-provided formatted text without further parsing or filtering or dangerous constructs (e.g., Javascript), and with some hope of successful output to non-HTML displays. It also supports more attributes than an unescaped outputText tag - for example, it supports styleClass.