This video screencast from a product manager at Microsoft explains one critical difference between Google Docs and Office Web Apps when used with the desktop version of Microsoft Office.
When you upload Office files to Google Docs, the file is converted into another format thus losing some of the formatting and other unsupported features.
Nick Simons from the Office Web Apps teams shares why he prefers storing documents on Office Web Apps (SharePoint and Windows Live SkyDrive) even though he has Microsoft Office on the desktop:
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Microsoft Office Web Apps is a free online version of Microsoft Office that includes Word, Excel, PowerPoint, and the OneNote Web App. If you are not signed-up with Office Web Apps yet, here’s a trick.
Microsoft Office Web Apps is a Google Docs like product that will let you create, edit and view Excel, PowerPoint and Word documents in the browser. This article describes how you can access web based Microsoft Office now.