You can already share files in SkyDrive with any friends; even if they don't have a Live ID they can see the files, but they'll need both a Live ID and an invitation to the Office Web Apps technical preview to edit the files.
You can only share a folder, not individual files within it, and it has to be a top-level folder (you can't share sub-folders without sharing the parent folder). But you do get a lot of options for who you share with; everyone, your Windows Live network, groups from your Windows Live Messenger friends list or specific people.
At this point, the only app that lets you edit a document at the same time as someone else is Excel. This is very flexible, but also rather confusing.
Unlike Google Docs, which highlights cells someone is editing in a different colour, the Excel Web doesn't show you who's working where so you can both be typing in the same cell at once – or you could delete a row that looks empty just as the other person is typing in it. Co-authoring also disables the undo and redo options.
AWKWARD COLLABORATION: You can edit an Excel spreadsheet with someone else, but then you can't undo changes
You get a little popup menu in the bottom corner to tell you who's working in the document, but you can't click on their name to send a message; to avoid frustration rather than collaboration, you're going to need to be on the phone or in IM while you work.
Collaboration within the desktop version of Word 2010 promises clear indications of who is working where; we hope this will show up in the web version too. OneNote has had co-authoring for some years, of the 'just type anywhere' variety; this works better in free-form notes and we expect the web experience to replicate that.
Baby steps for Office on the web
The very first release of the Office Web Apps is clearly a first step. It's disappointing in some ways; you don't get all the features of the desktop apps and sometimes it's slow.
It's certainly confusing: Excel Web has a great set of functions and formulae but you don't get the Formulas tab from the desktop ribbon that makes them easy to find – and you can create SmartArt in PowerPoint Web but you don't find that out until you make a new slide.
There are rough edges: PowerPoint Web will convert files from older formats to PPTX whereas Excel Web makes you view the workbook and choose Save As yourself. And we couldn't get Excel spreadsheets to scroll far enough to select more than a screen's worth of cells as a table.
DOC CONVERSION: You can only edit documents in the XML file formats in Office Web Apps – but you can convert them
But despite all that you're working in the familiar Office interface, with at least some of the powerful Office features – and it's free. Office Web has a long way to go and you certainly wouldn't abandon Google Docs for it any time soon, but it's off to a good start.
CREATE A DOC: Make a new Office document; Word and OneNote don't work yet
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Mary (Twitter, Google+, website) started her career at Future Publishing, saw the AOL meltdown first hand the first time around when she ran the AOL UK computing channel, and she's been a freelance tech writer for over a decade. She's used every version of Windows and Office released, and every smartphone too, but she's still looking for the perfect tablet. Yes, she really does have USB earrings.