Format was in the original release to support the floppy disk drive option. Floppy disks were optional, you could purchase the machine with just a cassette port to load BASIC programs.
DOS stands for "Disk Operating System" to reflect this was to be used with the floppy disks, and the software was an option.
Tim Paterson's "Quick-and-Dirty DOS 1.0 was approximately 4000 lines of assembler source. It did not have a format utility. Format.com was not written until the BIOS int 13h routines were standardized by IBM. You could format a disk fairly easily calling the drive controller directly.
From: Antov's brief history of MS-DOS
"This code (Paterson's) was quickly polished up and presented to IBM for evaluation. IBM found itself left with Microsoft's offering of "Microsoft Disk Operating System 1.0". An agreement was reached between the two, and IBM agreed to accept 86-DOS as the main operating system for their new PC. Microsoft purchased all rights to 86-DOS in July 1981, and "IBM Personal Computer DOS 1.0" was ready for the introduction of the IBM PC in October 1981. IBM subjected the operating system to an extensive quality-assurance program, reportedly found well over 300 bugs, and decided to rewrite the programs. This is why PC-DOS is copyrighted by both IBM and Microsoft.
It is sometimes amusing to reflect on the fact that the IBM PC was not originally intended to run MS-DOS. The target operating system at the end of the development was for a (not yet in existence) 8086 version of CP/M. On the other hand, when DOS was originally written the IBM PC did not yet exist! Although PC-DOS was bundled with the computer, Digital Research's CP/M-86 would probably have been the main operating system for the PC except for two things - Digital Research wanted $495 for CP/M-86 (considering PC-DOS was essentially free) and many software developers found it easier to port existing CP/M software to DOS than to the new version of CP/M. The IBM PC shipped without an operating system.
IBM didn't start bundling DOS until the second generation AT/339 came out. You could order one of three operating systems for your PC, assuming you popped for the optional disk drive and 64k RAM upgrade (base models had 16k and a cassette player port). These operating systems were IBM Personal Computer DOS 1.0, a version of the UCSD p-System, which was an integrated Pascal operating system something like the souped-up BASIC operating systems used by the Commodore 64 and others, or Digital Research's CP/M-86, which was officially an option although you couldn't buy it until later. Since IBM's $39.95 DOS was far cheaper than anyone else's alternative, darned near everyone bought DOS.
Microsoft Press' "MSDOS Encyclopedia" shows a reproduction of a late DOS 1.25 OEM brochure. Microsoft was touting future enhancements to 1.25 including Xenix-compatible pipes, process forks, and multitasking, as well as "graphics and cursor positioning, kanji support, multi-user and hard disk support, and networking." Microsoft certainly thought big, but, alas, the forks, multitasking, and multiuser support never came about, at least in US versions of DOS. Oddly, the flyer claims:
"MS-DOS has no practical limit on disk size. MS-DOS uses 4-byte XENIX OS compatible pointers for file and disk capacity up to 4 gigabytes."