How is an LOR presented when applying for grad school?
The rules vary greatly by country and program. You should follow the rules as specified by each individual program. 

For instance, in the US, the applicant should never see a letter of recommendation at any stage of the admissions process. Nowadays, this is circumvented by having the letter-writer submit the reference directly, with the applicant only "supervising" the process to see if a letter has been submitted. In the rare cases where everything is to be submitted together, it is usually required that the letter writer sign across the seal of the envelope, to ensure no tampering has occurred. 

As for the format, it should again follow local customs—for example, in the US, being submitted on official letterhead is sufficient; a mailed letter in Germany would be considered suspect without a stamp mark. (An emailed letter would be an exception to this, but would still be expected to have an electronic or digital signature of some sort.)