There will be occasions when you need to display some HTML tags like images or icons based on some condition and you end up using a formula text field to create a dynamic tag and save it as text field. It can also be a Rich-Text-Area field which will be saved as a HTML tag in backend.
When displaying the same in salesforce record view, it will take care of itself. But then the same need to be displayed as part of a custom component, which can be achieved using <lightning-formatted-rich-text/>
A lightning-formatted-rich-text component is a read-only representation of rich text. Rich text refers to text that’s formatted by HTML tags, such as <b> for bold text or <u> for underlined text. You can pass in rich text to this component using the lightning-input-rich-text component or programmatically in JavaScript. <lightning-formatted-rich-text /> tag has an attribute named value, where you need to pass the value and any HTML tag related data is displayed in actual format as per tags
HTML File
<template>
<lightning-formatted-rich-text
value={a_Dynamic_Field} >
</lightning-formatted-rich-text>
</template>
JS File
import { LightningElement } from 'lwc';
export default class Component_Name extends LightningElement {
a_Dynamic_Field = ''; // Some record formula field with HTML tag or a rich text field
}
Example of field which contains some HTML tag.
<img src="https://na9.salesforce.com/img/samples/flag_red.gif" alt="" style="height:15px; width:15px;" border="0" />
Output:

Resources: