Printing to terminal directly:
$ ls
a.out avg.c avg.h
Piping to cat
$ ls | cat
a.out
avg.c
avg.h
So that each line is one entry only, allowing the command the output is piped to to work as would likely be expected. For example (given your ls output), the following would probably not be what you want:
$ ls | sort -r
a.out avg.c avg.h
But because sort didn't know there was more than one item per line, it couldn't do anything. Compare this to what actually occurs:
$ ls | sort -r
avg.h
avg.c
a.out
You can achieve the (unexpected) first behavior by passing -C to ls.
ls automatically behaves like ls -1 when piped.
This is usually what you want when you are piping ls to awk or something like that, since it will treat the output of ls on a line-by-line basis.
To override this default behavior, you can use ls -C | cat.
ls can actually determine if it's outputting to a terminal or a file (with the isatty library call). If it detects a console, it will try to make it more compact for easier viewing.