early 15c., indenten, endenten "to make notches; to give (something) a toothed or jagged appearance," also "to make a legal indenture, make a written formal agreement or contract," from Old French endenter "to notch or dent, give a serrated edge to" (12c.) and directly from Medieval Latin indentare "to furnish with teeth," from in- "into, in, on, upon" (from PIE root *en "in") + verb from Latin dens (genitive dentis) "tooth" (from PIE root *dent- "tooth").
An indented document was usually, if not always, written in two or more identical versions. Orig. these were written on a single sheet of parchment and then cut apart along a zigzag, or 'indented' line. Each party to the agreement retained one copy, which he could readily authenticate by matching its serrate edge with that of another copy. [Middle English Compendium]
The printing sense "insert white space to force text inward" is first attested 1670s. Related: Indented (late 14c.); indenting.