Microsoft Office is the most popular office productivity application in the world. Other vendors have been trying to break into this market by providing tools at less cost or with new features. Collaboration has been a primary feature in the fight for the most feature rich application.
Google has been a primary combatant in this war (and part of why Microsoft is trying to buy Yahoo). Google apps give users the ability to collaborate on text documents, spreadsheets and presentations.
Microsoft has some collaboration tools now but they require expensive licences and the full application to be installed. Since Microsoft Word is a very large application this limits what can be done. Accessing Microsoft Word and other documents in Internet Explorer or another browser will vastly open up the pool of people that can collaborate on a given project and potently shore up Microsoft as the office application winner.
You get more information in thisMicrosoft Release about Browser based Office Support or this video from Microsoft.
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