Vim fold function which does indentation based folding.

gistfile1.vim

function! IndentationFoldExpr(ln) " {{{
  let line = getline(a:ln)

  if line =~ '^\s*$'
    return '-1' "'='
  end

  let ind = indent(a:ln) / &sw
  let ind_next = indent(nextnonblank(a:ln+1)) / &sw

  if ind_next <= ind
    return ind
  elseif ind_next > ind
    return '>'.ind_next
  end
endfunction " }}}

au FileType txt setlocal foldmethod=expr foldexpr=IndentationFoldExpr(v:lnum)