I noticed that Google has released a document editor to go along with their online spreadsheet application. I have played with it a little, and it is pretty decent. You can save your document locally as a word, oo, pdf or html document. You can also save it on google’s servers of course. You can also add collaborators, but I haven’t been able to play with that feature yet.
One of my biggest complaints about office applications is the lack of concurrency, ie. it is very difficult to have multiple people working on the same document at the same time. When I worked for Lockheed, we developed the documentation for our air traffic control software in MS Word. There were a lot of people simulataneously developing documentation. To have some sort of revision history, people would always save multiple copies in their own directories. At the end we would all try to merge our individual parts. What a disaster.