OASIS OpenDocument Format
Starting with this beta OpenOffice uses the OASIS OpenDocument XML format by default. This format is vendor and program independent, a long overdue concept in this market. If each music player used its own format or text files required a particular app to view correctly we would all go crazy, but this is exactly what we've been putting up with in the world of office suites. The goal of the OASIS format is to allow any program that supports it to natively open, edit and save files, no conversion, no mangled formatting. Expect this format to become standard in the open source community, just don't hold your breath for Microsoft. While they are free to use - or at least support - OASIS they have expressed no intention to.
Other File Format Support
As mentioned, the default format for Writer is the OpenDocument Text format. It also supports saving files in the older OpenOffice document format and most any Word document format you're likely to come across (version 6.0 and up including Word 2003 XML).
Save as box
In addition to the fully supported formats, Writer will open and convert a few additional formats, including Wordperfect. This is a new addition and lets me open all those ancient files from high school. Ouch, I think my writing has actually improved and that is scary!
Open files box
Now, of course, the real question, how well does Writer support Word files? To get a feel for this I tried to find a good complicated Word file. I settled on a nice long report, lots of tables, images, headers, footers, autonumber, equations, the works. Results? I'm sorry Writer, a valiant effort and quite readable, but the formatting got eaten. How bad? In Word it is a 27 page document. In Writer it comes to 33. Seems that Writer doesn't believe I use enough white space. Less complicated files opened without a problem.
Writer, like Word, lets you mark-up changes and notes on documents; which can then be reviewed. You can also put a password on the record of your changes. Writer also supports versions. This allows you to save the current state of a document then make additional changes and save again. Both version are retained. In fact, you can have a whole pile of versions. This is a good feature when collaborating with others and helps keep the number of files down. Word supports versions as well and - in fact - the interface is nearly identical.