With Office 2007, Microsoft decided to change default application formats from old, proprietary, closed formats (DOC, XLS, PPT) to new, open and standardized XML formats (DOCX, XLSX and PPTX). New formats share some similarities with old Office XML formats (WordML, SpreadsheetML) and some similarities with competing OpenOffice.org OpenDocument formats, but there are many differences. Since new formats will be default in Office 2007 and Microsoft Office is the most predominant office suite, these formats are destined to be popular and you will probably have to deal with them sooner or later.
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