How do I get the "candidate list" to appear in the PRC (Simplified) IME, and how do I adjust the list's appearance?
I recommend setting the candidate list to automatically appear as you type:
If it is not set this way, when you type the Pinyin for a character and press the <space bar>, you will only see one character, word or phrase:

In this mode, to see the candidate list, press <left arrow> to move back over the character, and the list will appear.

To see phrases, keep moving left with <left arrow>:

But this is a waste of time, you're not getting the
full benefit of this input method! Below are instruction to turn this
on in XP and Vista.
To make the list appear automatically as you type:

In Windows XP, on the Language bar click the Context menu and select "Properties":

Then in the Properties window click the checkbox for "Prompt step-by-step":

While you're in there, I recommend that you also
make sure that "Enable learning" is checked so that the list will sort
according to your frequency of usage over time. (Also notice that under
"Candidate option"
you can set the list to "Row style" or "List style", although I did
not circle that here.)

When typing, to select a character or phrase from the list you can:
- type the candidate number,
- press the down arrow and then use the up and down arrows to move around, then press enter to select a candidate,
- or click on it with a mouse.
While you are on the sentence line, when you press
<space bar> twice or <Enter> once, you have accepted the
suggested character(s) there.
In Windows 7 and Windows Vista, on the Language bar click the Options menu and in the menu click "Options".

In the dialog box that appears, make sure the
Input Style is "MSPY New Experience", and click the checkbox next to
"Candidate Prompt - MSPY New Experience".
Here it is in Vista (Windows 7 initially shipped with this version too):

And here it is in Windows 7 after installing the MSPY 2010 Update:

You can also select preferences like "Horizontal window" or "Vertical window", and "Word prediction".
While you're in there I recommend that you also
look at "Self-learning and User-defined Phrase", and check "Enable
self-learning" so that characters sort as you use the IME. After
installing the 2010 update
you'll find this in the area right above the candidate style
preferences, but in the 2006/2007 versions it's in the next tab, "MSPY
New Experience & Classic Input Style" and look under "Dictionary
Setting":

When typing, to select a character or phrase from the list you can:
- type the candidate number,
- press the down arrow and then use the up and down arrows to move around, then press enter to select a candidate,
- or click on it with a mouse.
While you are on the sentence line, when you press
<space bar> twice or <Enter> once, you have accepted the
suggested character(s) there.
Need more help?
For more information on using this IME, see my pages on where to find English language "user guides":
English Language Help Files for Windows 7 and Vista
In Windows 8, the only way I've found to access this is to turn on the old-style Language bar (on the desktop Taskbar), as explained towards the end of my page on Windows 8 Traditional Chinese Pinyin input (search for "Advanced Settings". Then follow the instructions for Windows 7/Vista.
For Windows XP, see the Windows 7/Vista Help page and you'll get the general idea. Sorry, never got around to doing a separate page on that.