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It is not there to format messages in HTML, else it would provide a tool for scammers or to spread malware.
I think you’ve misunderstood me though, I’m talking about the notes thing in Steam’s in-game overlay, not the forums or messaging.
I don’t think that the security issues you mentioned would apply in the notes thing, but I could easily be wrong about that.
Code block is a block level formatting, like the headers and paragraphs are.
Code is an inline level formatting, like bold/italics/strike through are.
It's not uncommon, github wikis have similar formatting options. There's a format for code blocks, and a format for inline code. They have different uses.
In either case the purpose of the code styling options aren't to let users write html/css in their notes. It just styles text a certain way to make it clear it's different from normal text blocks.
In the case of github I often use the inline code styling to highlight database names, table names, field names, class names, variables names or other things that are directly related to code being discussed in text (paragraphs sentences). It's not unlike bolding keywords in a block of text. But regardless it's just styling.