Many full screen writing applications like WriteRoom and Byword either add a margin to the bottom or support centering the view around the current line.
You could also create ~/Library/KeyBindings/ and save a property list like this as DefaultKeyBinding.dict:
{
"~p" = (moveToEndOfDocument:, insertNewlineIgnoringFieldEditor:, insertNewline:, insertNewline:, insertNewline:, insertNewline:, insertNewline:, insertNewline:, insertNewline:, insertNewline:, insertNewline:, insertNewline:, insertNewline:, insertNewline:, insertNewline:, insertNewline:, insertNewline:, moveWordBackward:, moveToEndOfParagraph:, moveForward:, centerSelectionInVisibleArea);
"~r" = (moveToEndOfDocument:, moveWordBackward:, moveToEndOfParagraph:, moveToEndOfDocumentAndModifySelection:, deleteBackward:, centerSelectionInVisibleArea:, insertNewlineIgnoringFieldEditor:);
}
After reopening TextEdit, ⌥P should add padding lines to the end and ⌥R remove them.
Best Answer
The format menu has a toggle to switch things for you.
Pressing shift + command + T will toggle the document to plain text mode.
You can also set the default format in the preference pane for the app.