Then comes a competitor, Open Document Format, a completely open format that everybody can use. It starts getting popular, then gets backed by major players like IBM and Sun. It gains momentum to be the world wide document standard of the International Standards Organization. This would mean there's a push for formats other than Microsoft's. Most governments in the world would adopt it, most products would support it. Microsoft would have to support it. MS Office would have to compete solely on its merits.
This threatens the Office monopoly. This cannot be allowed.
So Microsoft has a proprietary XML format for Office that nobody but Microsoft understands and is riddled with errors. But Microsoft must use any means necessary to push it through to be the standard instead of ODF.
And when they say "It's XML, anybody can read it," remember that the following (although an extreme example) could be a valid XML file format:
<?xml version="1.0"?>
<document>
[bunch of proprietary binary file data here]
</document>
I also saw where they had interdependent data stored in more than just the XML file, so that even when the XML itself seemed straightforward, if you tried to edit it, it didn’t work.
My guess is Office 2000 or Office 2003 are more than good enough for 95% of Microsoft's business customers